Office to Education
We repositioned an East Rand office park into a fully let school campus.
Markets move faster than buildings. Value sits in the gap between what an asset is and what it could be.
How an office park found a new purpose
The Situation
A multi-unit office park of around 2,700 sqm had lost its anchor corporate tenant. Demand for secondary office space in the node had weakened for structural reasons, and conventional leasing had stopped producing results. Held as an office, the position could only deteriorate: rising vacancy, softening rents and no catalyst for recovery.
The Insight
Judged on its physical merits rather than its zoning label, the property was a school in all but name. Self-contained units, a landscaped courtyard, an adjoining parcel of roughly 10,000 sqm and a residential catchment are features an office investor overlooks and an education operator looks for.
The Execution
The conversion was phased in step with the operator’s growth, keeping capital outlay modest at every stage. Offices became classrooms, adjacent units were combined into shared spaces, and the adjoining land became sports fields and a drop-off area. A sectional title scheme was registered over the units, and the leases were structured to support long-term tenure.
The same building, a different future
From 27 office units to one school campus
Durable, escalating income with room to grow
Capital protected on the way in
The building already had the layout a school needs, so conversion cost was modest relative to the value it unlocked. Because units were handed over in step with enrolment, no capital was committed ahead of demand.
A covenant built to last
Rental is secured under long-dated leases with contracted annual escalations. The operator’s regulatory approvals, parent base and fit-out are all tied to these premises, which makes the income more defensive than that of most secondary office assets.
Flexibility on exit
With sectional title in place, the asset can be held as a single income-producing campus, sold whole, or sold unit by unit to investors or to the operator itself. A wider pool of potential buyers supports pricing.
Ken Gerber
Founder, Lumina Capital
Ken Gerber began as a commercial property broker and has spent close to 30 years in the industry, most of it with one of South Africa’s leading property services groups, where he founded several businesses, served as an executive director on the group board and held a minority shareholding. He has held directorships across many companies, from group subsidiaries and specialist property holding companies to the concession company for a municipal headquarters delivered through a public-private partnership.
The businesses he led negotiated developments, renewals, acquisitions and disposals across office, industrial and retail property, and advised some of South Africa’s largest corporates and multinationals in banking, fuel retail, telecommunications and technology on their portfolios, including specialised assets such as call centres, data centres and breweries. Transactions of note include a 90,000 sqm headquarters consolidation and the conversion of an industrial building, acquired at industrial value, into a 38,000 sqm operations campus for a major bank. An interiors design and build company he founded gives him a working understanding of what occupiers want from a building, and of what a conversion costs and how long it takes.
A property investor in his own right, he brings an occupier’s perspective and an owner’s discipline to Lumina.
Markets change. Assets do not always change with them. Value is created by those who recognise the gap and act on it.
A vacant secondary office is valued on the hope of a tenant. A fully let school campus on long-dated, escalating leases is valued on income, and its sectional title gives the owner more than one way to realise that value. Closing that gap at modest cost, without capital committed ahead of demand, is where Lumina creates value for investors.
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