On a quiet Johannesburg morning the glass façade of the Carlton Centre reflected an empty lobby, a reminder that South Africa’s former tallest building has been without a tenant for months. The property now sits on the market again, this time as part of a broader effort by Transnet Property to stem a cash-draining loss streak.
According to the division’s latest financial snapshot, Transnet Property recorded a loss of roughly R782 million in the last year, with revenue slipping 3.4 percent from the previous period. The division’s EBITDA, that is Earnings Before Interest, Tax, Depreciation and Amortisation, a common measure of operating profit, swung to a R195 million deficit, a 211 percent drop.
Chief executive Kapei Phahlamohlaka told reporters the shortfall stemmed largely from vacant buildings that could not be filled. “Revenue decreased by 3.4 percent due to external revenue being adversely affected by vacant properties that could not be filled,” he said. He added that the loss of major tenants in precincts such as Deal Party, Arcadia Park in the Eastern Cape and Karsene in Gauteng hit the bottom line hard.
Transnet Property, the property arm of the state-owned logistics group, holds more than R16 billion in assets across residential, commercial and industrial sectors, excluding projects still under construction. Its investment property portfolio alone is valued at over R10 billion, while property, plant and equipment assets stand at about R1.8 billion. Yet the division struggles to compete with private-sector landlords that can offer newer, better-maintained spaces. “Our poor portfolio quality makes it challenging to secure higher rentals comparable to well-maintained private sector portfolios,” Phahlamohlaka explained.
What the sale means for the market
The plan to off-load “non-core” assets, a term used for properties that do not fit the strategic focus of the business, includes the iconic Carlton Centre, several golf courses, shopping malls and parcels of land. The company previously tried to sell the building in 2023, but the process fell through when bidders could not prove they had the necessary funds.
Phahlamohlaka said the current round of disposals is expected to raise cash and cut holding costs. “The sale of the residential portfolio could save about R200 million per annum in holding costs,” he noted. By reducing the number of properties it must maintain, the division hopes to lower its operating expenses and improve its balance sheet.
For small developers and investors, the move opens a narrow window. The state is now looking for private-sector partners to develop commercial opportunities or to take over assets for private development. While the process is still in its early stages, those with ready capital and the ability to refurbish ageing buildings could find a foothold in a market where private landlords dominate.
Transnet Property also flagged a positive outlook for the next financial year, projecting a 54.4 percent rise in revenue compared with the 3.4 percent decline recorded last year. Whether the projected rebound materialises will depend on how quickly the division can convert its asset sales into usable cash and whether it can attract reliable tenants to the remaining portfolio.
Why state-owned property portfolios fall behind private landlords
The gap Phahlamohlaka describes between a state portfolio and a well-maintained private one is structural rather than a matter of effort. A private landlord whose building starts losing tenants has one business, and refurbishing that building is the business. A property division inside a state-owned logistics group competes for capital against locomotives, port cranes and track, and in that contest a tired office block in a secondary node rarely wins. Maintenance gets deferred, the deferral shows up as higher vacancy, the higher vacancy weakens the case for the next round of capital, and the cycle tightens.
Procurement rules compound it. A private owner can commission a refurbishment on a signed contract in weeks. A state entity runs a tender, and the time that takes is time the building spends empty and the prospective tenant spends signing a lease somewhere else. Neither of these is a scandal. They are the ordinary cost of holding commercial property inside a public entity, and they are a large part of why disposal, rather than refurbishment, so often becomes the preferred route.
The hard part of selling an empty landmark
A vacant trophy building is a harder sale than its profile suggests, which is part of why a first attempt can collapse and a second can take years. A buyer is not paying for the address, it is paying for the future income, and an empty building has none. What the buyer inherits instead is the holding cost: rates, security, insurance and the electricity required simply to keep an unoccupied tower from deteriorating. Those costs run from the day of transfer, while income starts only once tenants are signed.
That arithmetic pushes the price a rational buyer can pay well below what the building cost to build, and often below what the seller believes it is worth. It also narrows the buyer pool to parties able to fund both the purchase and a refurbishment programme from their own balance sheet, which is precisely the profile that a proof-of-funds requirement is designed to test. That is the real barrier for the smaller developers the division says it wants to attract, and it shapes how an invitation to partner should be read.
