GRAHAM NORRIS
Property Editor
WITH a single new product, Louis Group International (LGI) has changed property ownership from a corporate luxury to a corporate necessity, says Peter Rowell, managing director of Seeff Commercial Properties.
He was commenting on the launch of Advance, which he describes as a simple, effective and low risk financial package that enables a commercial enterprise to reap the rewards of property ownership without tying up its valuable cash resources.
"It is appropriate on the tenth anniversary of our new democracy that Advance is formally announced by our group," said Dr Alan Louis, CEO of Louis Group International.
"It is our vote of confidence in the sound economic policies adopted by the government and the bright future for this country. For too long now, businessmen have either not had the confidence to invest in fixed property, or they have been unwilling to tie up the necessary working capital.
We believe that we have solved their dilemma." Rowell said: "Advance is simple and that's why its such a powerful product. Most commercial businesses of any standing usually sign leases of three to five years, and in many instances they exercise options and end up in their premises for at least ten years. Then they walk and have nothing to show for their commitment.
It's quite sad, because had a product like Advance been readily available 10 years ago there would now be some very wealthy people. "Louis Group International is a substantial group now celebrating 90 years of consistent growth that is steeped in property and property finance. This, combined with low interest rates and a strong property market, has enabled them to finance commercial property acquisitions by owner-occupier firms."
Simply put, instead of signing a normal five plus five year lease, the business must sign for six plus six. If the business exercises its option and sees the 12-year period through then unencumbered ownership passes to the tenant free of charge. "This may not sound so unique," said Louis, "except for the fact that we offer one further very important safeguard. Louis Group International gives an undertaking at the beginning of the term to buy back the property at the end of the 12 year period at a predetermined price. This means that the business concerned can accurately plan their "rental" expense for a twelve-year period and either elect to retain the building free of charge, sell it on the open market at a profit, or sell it back to LGI at the end of the period."
Louis said Advance was not a free ride to instant wealth, but it was an indispensable product available to solid businesses wishing to enhance their asset bases without limiting their working capital. Rowell said the monthly payment on a traditional lease would probably be marginally, but certainly not significantly, less.
"Considering that the average tenant is often willing and able to pay a significant rental premium for other features of lesser importance than ownership it will be hard to believe that most firms will not take advantage of Advance," he said. Louis Group International has already successfully implemented numerous similar products such as the acquisition of Rosmead Centre in Kenilworth on behalf of the Medicross Group, which involved a capex of more than R37 million.
Medicross had already been a tenant in the centre for 10 years when Louis Group International structured a transaction so that they could obtain ownership.
This deal, although concluded only six months ago, has been extremely beneficial for Medicross from both an operational and a financial point of view. Not only have their facilities been extensively upgraded, but they have acquired ownership of a valuable asset at the ideal time to take advantage of a growth market. The first product that is to be developed specifically for users wanting to take advantage of Advance is Century Falls, a new office park to be constructed within easy walking distance of Canal Walk Shopping Centre. Louis Group International purchased this prime site with the express intention of developing an office park for users wanting high visibility and accessibility in a secure environment.
Publisher: Sunday Tribune
Source: Sunday Tribune
New product offers investment deal
Posted On Monday, 01 March 2004 02:00 Published by eProperty News
WITH a single new product, Louis Group International (LGI) has changed property ownership from a corporate luxury to a corporate necessity, says Peter Rowell, managing director of Seeff Commercial Properties.
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