Paramount - purchasing and financial structuring

Posted On Saturday, 01 September 2001 05:01 Published by eProp Commercial Property News
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PARAMOUNT Property Fund on the Acquisition Trail Paramount Property Fund (Paraprop), listed on the JSE Securities exchange earlier this year and rated one of South Africa's top property funds, is on the acquisition trail to boost its portfolio of properties to R1-billion by end October.

JSEParaprop, managed by Spire Property Services, a Cape-based specialist property asset management group, is positioned as a 'new generation' property fund with a diversified portfolio of R360-million.
MD of Paraprop, Rodney Squire-Howe says the fund is on track to deliver its forecast 16% annualised yield. He points out this represents excellent value, especially when compared to the rest of the sector, which is trading at an average yield of 12.9%. At this price Paraprop offers excellent scope for capital growth, as well as providing a high-income yield.
Squire-Howe says Paramount was created in answer to many of the historic criticisms of the JSE's listed property sector and was carefully structured to provide high yields and sustainable growth.
Paraprop has a high quality property portfolio, which is diversified both by property type and geographic location. As it stands 40% of its portfolio is in the office sector, 29% in industrial property, 19% in retail, and 12% in parking. Geographically, 41% of its portfolio is in the Western Cape, 32% in Gauteng, 23% in KwaZulu Natal and 4% elsewhere.
In growing the fund, Paraprop's strategy is to maintain a diversified portfolio.
'We are looking to acquire a substantial holding in offices, which in the last few years has been the top performing sector, particularly in niche locations in the Western Cape, Johannesburg's northern suburbs, and Pretoria's eastern suburbs.'
'We would like to maintain a good exposure to industrial properties- we believe that after five years' adaptation and adjustment to the new competitive environment, sound growth can be expected from the warehousing, manufacturing and tertiary industrial sectors.
We want to increase substantially our exposure to retail, as well-managed retail has the potential to out-perform.'
'But, retail over the past 18 months or so has been undergoing a major adjustment in response to changing patterns of disposable income. This has had a significant impact on rental growth and vacancy levels in shopping centres, and until recently these have not been properly reflected in the retail property prices. Recently, however, landlords have become more realistic and the market is moving to a new equilibrium.'
Paraprop's focus is on high-quality properties, which have an ability to sustain capital values and grow income streams into the future.
Kerswill notes that high quality properties have higher prices and correspondingly lower yields. In order to be able to acquire such properties and still deliver high yields to investors, Paraprop uses an innovative 'deferred equity' structure in its acquisitions which 'turbocharges' the yield.
This structure has found favour with both property sellers and vendors, rather than diluting the quality of the fund with high yielding, low quality property.

Last modified on Thursday, 24 April 2014 16:17

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