How does the business operate on a daily basis?
The property is being sold with another business that Aldes has listed. ( See Mandate 38373 )
The business being sold occupies approximately 100 sqm of the existing footprint.
The rest of the building has a short-term residential flat of 130sqm and 2 other tenants:
- An IT Company
- A Catering Company

Is a copy of all the lease agreements on the property available?
The owner of the property, also owns one of the Businesses that operates in the building.
No formal leases are in place with this business.
There is a lease for the catering company.
The IT company does not have a lease but rents on a month to month basis. ( they pay an exceptional low lease - see the income growth opportunity section )

Is the business VAT Registered?
Yes - but the shares are not being sold.
The property will be sold OUT of the Legal Entity

What VAT documentation is on file?
On File

Are there up-to-date Management Accounts available?
Yes - detail provided in a DD

How could the profitability of the business be improved?
The IT company ( a friend of the owner of the building ), rents for R86 per sqm.
The market rate is around R 200 per sqm.
The catering company rents for R 56 per sqm with a market rate of around R125 per sqm.

Because the owner runs his other business in the building that does not need the space, he opted to rent those sections out for low rental amounts.

The business he owns, also pays the municipal reates and this is not being recovered from the tennants.

There is a laundry on the premises of which the income is mostly the actual laundry of the other business he owns that operates from the premises - a Holiday Property Rental Business - see mandate 38373 ). The Laundry does not pay rent.

How could the income of the property be increased?
Various strategies plans could be implemented like:

Plan A - move the Holiday Rental Business to another location
- Rent the spaces out for higher market related rentals

Plan B - the same but convert some spaces to also become short term holiday rental spaces

Plan C - a combination of the above
- This is a multistory level building with opportunities

What are the main assets of the business?
The main assets of the business consist of the property plus a full furnished holiday rental flat.

What is their overall condition?
The building is not that old and is in a good condition and well maintained.
Interior also a good condition.

Do any require repairing?
Ongoing small maintenance repairs as in any building.

How have they been valued ?
Owners valuation based on ROI of income

Strengths?
Prime Location
- Situated on Main Road within one of South Africa's premier coastal tourism destinations.
- Benefits from strong tourism demand, high seasonal visitor numbers and ongoing property investment activity.
- Excellent visibility and accessibility.

Strategic Multi-Level Building
- Multi-storey building configuration provides flexibility for multiple future uses.
- Ability to reconfigure, subdivide or repurpose various sections to maximise returns.
- Rare opportunity to acquire a centrally located building with redevelopment potential.

Existing Rental and Business Ecosystem
- Property already accommodates an established holiday rental management business.
- Existing laundry operation serves the accommodation sector.
- Established operational infrastructure and utility services already in place.

Association with Established Tourism Brand
- Connected to a business operating since 1989 with longstanding relationships in the local tourism market.
- Strong local market recognition and recurring tourism-driven activity.

Significant Rental Optimisation Potential
- Several areas appear to be under-rented relative to market value.
- Immediate opportunity to review and implement commercial leases at market-related rentals.
- Potential to materially improve net yield without major capital expenditure.

Weaknesses?
Municipal Rates Not Fully Recovered
- Current owner absorbs municipal rates and related property costs that are not fully recovered from tenants.
- This suppresses the property's effective yield and profitability.

Non-Market Internal Occupation
- The holiday rental business occupies portions of the building that could potentially generate higher third-party rental income.
- Existing arrangements may not reflect true commercial rental market values.

Laundry Operation Not Paying Market Rent
- Laundry income is largely generated through servicing the associated holiday rental business.
- Laundry operation reportedly does not contribute market-related rental income to the property.

Property effectively subsidises part of the laundry operation.
- Income Concentration
- Certain revenue streams are linked to businesses under common ownership.
- Creates dependency on the current operating structure.

Underutilised Space
- Certain sections of the building may not currently be producing their maximum possible income.

Opportunities?
Opportunity 1: Rental Optimisation Strategy

Relocate the Holiday Rental Business
Move the holiday rental business management offices to alternative premises.
Lease the vacated commercial areas to independent tenants at market-related rentals.
Recover municipal rates, utilities and common-area costs through lease agreements.
Potentially increase net operating income significantly.

Expected Benefits
Improved rental yield.
Simplified property investment model.
Increased investor attractiveness.
More predictable long-term income.

Opportunity 2: Holiday Accommodation Conversion

Convert Portions to Short-Term Accommodation
Retain selected commercial tenants.
Convert suitable upper-floor or unused spaces into holiday accommodation units.
Capitalise on the holiday rental business's strong tourism market.
Create a hybrid commercial and hospitality asset.

Expected Benefits
Higher income per square metre.
Exposure to premium holiday rental returns.
Diversified revenue streams.
Increased overall property valuation.

Opportunity 3: Hybrid Redevelopment Model

Combination Strategy
Relocate the existing holiday rental office.
Retain strong commercial tenants.
Redevelop selected spaces into boutique holiday studios, executive apartments or serviced accommodation.
Continue using the property's relationship with the holiday property rental business to drive bookings.

Expected Benefits
Maximum utilisation of the building.
Multiple income streams.
Stronger resilience during economic cycles.
Potential for substantial capital growth.

Tourism Sector Growth
- Continued demand for coastal holiday accommodation.
- Growth in domestic tourism.
- Increasing popularity of managed self-catering accommodation.
- Ability to leverage the existing business cient base and owner relationships.

Threats?
Tourism Market Fluctuations
Holiday accommodation demand remains influenced by economic conditions and tourism trends.

Municipal Cost Increases
Rising rates, taxes and utility costs could impact profitability if not fully recovered from tenants.

Development Costs
Property upgrades or holiday accommodation conversions may require capital investment.

Regulatory Changes
Future regulations affecting short-term accommodation could impact operating models.

Competitive Property Market
New commercial and accommodation developments could compete for tenants and guests.

What is the reason for the sale?
The owner wants to downsize his business endeavours in the town.

Why is this a good business?
The real opportunity is not the property's current income stream but rather the embedded upside that has not yet been fully unlocked.

Several expenses and occupancy arrangements currently benefit associated businesses rather than the property itself. By introducing market-rate rentals, correctly recovering municipal costs, restructuring laundry occupancy, and potentially repurposing portions of the multi-story building, a purchaser could substantially improve both income and asset value.

The association with the long-established holiday rental business, together with the property's central position, creates a unique mixed-use investment opportunity offering immediate optimization potential and long-term redevelopment upside.

Why is this property a good investment?
This opportunity comprises a strategically located commercial property in the heart of a well-known coastal town, with significant upside from improving the building's utilization.
The property currently accommodates a holiday property rental operation as well as a laundry business, IT company and a Catering Business.
A number of operating costs and opportunity costs are presently being absorbed by the property owner, creating immediate value-enhancement opportunities for a future purchaser.

The property benefits from its association with the long-established Holiday Property Rental Business, which has operated in the town for approximately 40 years and manages over 120 holiday properties