Major changes coming to Cape Town’s tallest building

The Competition Commission has recommended the approval of the sale of the bottom nine floors of Cape Town’s tallest building, the Portside Tower. 

Accelerate Property Fund (APF) is selling the nine floors, making up 50% of the tower’s rental space, as part of its attempts to significantly reduce its debt burden. 

APF is well-known for owning South Africa’s largest shopping mall in Fourways. However, the poor performance of this mall has put the company under immense financial pressure. 

Since the 2020 financial year, the first reporting period since the mall expansion, the mall has suffered several downward fair value adjustments.

APF, which owns 50% of Fourways Mall, has been forced to reduce the value of its stake from R4.8 billion to R3.9 billion in just four years. 

Apart from the declining value of its stake, the mall’s poor performance has also resulted in pressure on the company’s revenue. 

From 2019 to 2024, the property manager has seen its revenue tumbling from R1.2 billion to only R819 million.

This has translated into a string of substantial losses for the company, forcing it to consider selling assets to raise capital.

These asset sales include the nine floors APF owns in the Portside Tower in Cape Town, which have now been recommended for approval by the Competition Commission. 

The Commission has recommended that the Tribunal approve the proposed transaction whereby Penalten intends to acquire nine floors of Portside Tower, with conditions.

The primary acquiring firm, Penalten, does not control any firms and is wholly owned by the Cavaleros Group. 

Penalten owns several properties in South Africa and has significant interests in commercial property in major metros. 

Portside Tower is located at 5 Buitengracht Street, Cape Town, in the Western Cape Central Business District and comprises Grade A and Grade P office property. 

The Commission believes that the proposed transaction is unlikely to substantially lessen or prevent competition in any market. 

The merged entity has agreed to employment and procurement commitments to address public interest concerns.

Portside has become one of the iconic features of the city’s skyline and is built on land that was once half-owned by Donald Trump. 

First conceived in 2008, the building was meant to be a hotel that would reach as high as 150 metres. 

The Trump Organisation and Devland had a 50-50 partnership and planned to develop residential property and hotels in South Africa worth over R5 billion.

The project was valued at R1.6 billion in 2008 and was the first significant skyscraper developed in Cape Town’s CBD in over a decade. 

Due to the Great Financial Crisis (GFC) and challenges in securing a hotel management contract, the project was put on hold for a few years. 

After the design was altered to reduce the height of the building so as not to obscure the view of Table Mountain, construction began in late 2010. 

Strangely, for a joint initiative, Old Mutual and FirstRand wanted to be able to provide two different addresses for each of them to use from the same building. 

Thus, the building came to occupy an entire city block to enable Old Mutual’s address to be on Bree Street and FirstRand’s on Buitengracht Street. 

Over time, Old Mutual began concentrating its office space near its headquarters in Pinelands, pushing it to sell its office space in Portside. 

Nine floors were snapped up by Accelerate, which leases out the space to corporate clients, while FirstRand continues to occupy the rest of the building.