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Send  Share  RSS  Twitter  11 Mar 2009

VENTURES: Madison Tests Bermuda's Waters

 



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Madison Property Fund Managers’ international investment company, the recently established Global Phoenix Property Investments, will list on the Bermuda stock exchange towards the end of May. 

Phoenix’s declared aim is to buy strategic stakes in listed property funds in the UK, continental Europe and Australia while these are still valued at bargain-basement levels. 

Discussing the new venture with prospective investors, Mike Flax, Executive Director of Madison, said that the timing of the launch is near-perfect.

“Listed real estate companies in the established western markets,” he said, “have across the board been dealt devastating blows by the global credit and economic crunch. As a result they are now trading on average at around 20% of the highs they reached in 2007 and early 2008 – but many of these companies, although heavily indebted, still have valuable portfolios and satisfactory occupancy levels and are continuing to give reasonable returns.”

International property cap rates, said Flax, are now moving well into double figures while ten year government bonds, which traditionally have always been closely tracked by listed property, are now trading at ± 4%.

“In the property sectors we have, therefore, a once-in-a-lifetime opportunity and we are determined not to miss it.”

Property, he added, had always “come back stronger” from its low points in the graph and he is confident that internationally it will do so again from late 2010/early 2011.  Phoenix, he said, will probably stay in existence for ± five years after which it will be wound up, its capital and profits being paid back to investors to enable them to make the most of the next boom. 

Flax revealed that originally he had planned simply to invest some of his own funds and that of associates in a portfolio of foreign property companies.  Then, he said, it had become clear that small investments, minority shareholdings, could be at the mercy of the vulture buyers now hovering around and looking for companies to “steal” at low-low prices.

“We realised that the only sound plan would be to acquire larger strategic stakes in a smaller group of counters.  The stake has to be big enough to allow us to play a white knight role and to be able to block moves with which we do not agree – something that Madison has many years of experience in.  It was this realisation that led to the setting up of Phoenix.”

Madison management, said Flax, will personally be big investors in Phoenix and they have identified other cornerstone investors alive to the opportunity here.  Phoenix, he said, has been established so as to allow South African investors to take part in the IPO by using their rands via an asset swap facility.

“Our goal is to invest anything from US $100 to US $200 million after identifying the companies we favour.  We will help to recapitalise their balance sheets through rights issues or shares for cash deals.”

Flax said that the Phoenix opportunity resembles closely that of Spearhead Property Investments, which he listed on the JSE in 1999 – at the bottom of the SA economic cycle.  Spearhead shares then touched R4,50 but by 2006, when they sold out to Redefine, had gone above R45, i.e. had grown ten-fold in six years.

“I think that a similar performance is more than possible at Phoenix,” said Flax.

Jim Shankland, a top UK property practitioner and former Chairman of the Royal Institute of Chartered Surveyors will be Chairman of Phoenix.

UK-based, he is, said Flax, “one of the foremost practitioners in European real estate and well networked in banking and REITS circles.  Add Marc Wainer and Gerald Leissner to that management mix and Phoenix has a very strong team to take it forward.”

Phoenix, although listed in Bermuda , will be registered in Guernsey, to take advantage of its favourable tax regime.


 
 
 
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