Rael Levitt, a former auctioneer, has seamlessly transitioned to commercial property development. He recently spoke at an event hosted by Ortjet Cape Town, a non-profit organisation, which supports entrepreneurs, where he detailed how he had been working in real estate since he was a teenager; mastering various roles.
Levitt may be most famous among South African business circles for founding what at one stage was the country’s largest auction house: Auction Alliance, a company that went from sheer highs to sad lows. He and his team were entrusted with the largest and most high-profile auctions for years and many of the company’s former employees have gone on to have storied careers in their own rights.
“Real estate has never actually left me. I started in the industry in 1988 when I was 17. In the early 1990s, I was running Levee Group which sold distressed assets, including Freddie Steenkamp and politician Allan Boesak’s Foundation of Peace and Justice. I was able to grow my business quickly and soon became part of Seeff,” he says.
After the delisting of Seeff Holdings in 1998, Levitt completed a management buy-out and renamed the company Auction Alliance. The company opened in several cities, including Pretoria, Johannesburg, Port Elizabeth, Durban, Nelspruit, and even Windhoek and Dubai.
But the house folded when he was accused of ghost-bidding, in the largest and most significant auction his company ever managed; Quoin Rock Wine and Vineyards Estate, a majestic Stellenbosch property. SARS had seized the estate from Dave King over taxes owing in the hundreds of millions.
Levitt then resigned as CEO and went on a sabbatical, earning an MBA degree from UCLA and a Master’s degree in Singapore. During this time, he tried to work out in which direction his working life should head next and also how to deal with a barrage of negative media in SA.
“It was an enlightening and fulfilling experience. I found Americans were intrigued that my career had faced a scandal. I was ready to get back into business and property was something that I didn’t want to let go of,” he says.
While he lost his business, Levitt was not charged with any crime and after years of therapy and introspection, he soon returned to life as an entrepreneur. He stumbled upon a German company that happened to be listed on the JSE and also the London Stock Exchange: Sirius Real Estate. Sirius, named after the dog star, used to be a tired British property group that owned a mix of assets, including standard offices.
But it had been turned around by Andrew Coombs, a British businessman who had impressed at shared office provider, Regus. Coombs changed Sirius’ strategy such that it focused its investments on business parks which would attract small and medium enterprises (SMEs). These parks tended to lie on the edges of business centres as opposed to in the middle of cities, such as the capital, Berlin, and economic powerhouse, Munich. Sirius owned these business parks, as well as a personal storage business, and, eventually, Levitt, met with Coombs. He told the British taskmaster that he had been inspired by Sirius and that his star could rise again.
Levitt returned to SA, acquired his first industrial property, and got to work on building Inospace with the help of former Investec banker, Nicholas van Eeden. Levitt explains that now lnospace converts buildings, often located outside Johannesburg and Cape Town’s premier business nodes, into flexible office business parks designed to appeal to small and medium-sized enterprises.
Levitt says the sky is the limit for the specifications which each park can meet for each tenant. The likes of designer shoe exporter Veldskoen is now an Inospace tenant.
“Our parks include studios, storage, and traditional warehouse space,” Levitt says.
The company now owns 44 business parks with an asset base worth R2bn. It has recently opened a business park in Glasgow, Scotland, where it operates as Inospace Lightyear.
Levitt doesn’t see demand for Inospace’s asset class waning any time soon.
“At the Le Marché International des Professionnels de L’immobilier (MIPIM) global property conference in Cannes, France, the question of vacant offices was hot on the agenda. While everyone agreed that the office sector would change, the world’s most influential players in the property industry were looking for innovative ways to repurpose the growing number of redundant office blocks,” he says.
The largest industrial property owner in the world, Prologis, recently announced that it had acquired an 11 000 m² office block in the US and had plans to develop it into an 18 000 m² logistics facility.
“It is critical to understand that the Prologis example is unique because the office property they plan to convert is unique. Their newly acquired complex sits on a giant piece of land, a critical requirement for logistics real estate that relies on vehicle delivery and despatch. The site is adjacent to highways, twenty minutes from a port and also an international airport, and was right near several dense population centres. This is a perfect situation,” he says.
“I am, therefore, regularly asked about emptying office blocks and whether Inospace can also convert them into light industrial or smaller logistics real estate assets. Most investors never believed that we would ever live in a world where industrial space is worth more than office space,” he says.
Levitt may list Inospace on the JSE or another stock exchange in the future, as demand for specialised industrial and logistics workspace grows and investors recognise that these assets are a gold mine of the present and future.