Madison 'dips its toes' into UK property industry

Posted On Thursday, 15 February 2007 02:00 Published by eProp Commercial Property News
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Listed property asset manager is expanding into the overseas property market and intends to acquire 50% of the management company of UK-based property fund CIREF

Angelique de RauvilleListed property asset manager Madison Property Fund Managers said on Wednesday it is expanding into the overseas property market and intends to acquire 50% of the management company of UK-based property fund CIREF.

The acquisition, which is still subject to Madison board and Reserve Bank approval, was initially expected to be earnings neutral but would be earnings enhancing in the future.

Madison, which was the first property asset manager to list on the JSE last June, also reported yesterday its maiden results for the year to December, saying it had beaten its distributable earnings forecast by 16,5%.

The company announced a maiden distribution of 39c a linked unit for eight months and said it had delivered a 47,8% total return since listing.

Madison is the asset manager of South African listed property companies Redefine Income Fund, ApexHi Properties and Hyprop Investments. The company has R26,2bn in assets under management.

Redefine Income Fund has an 18% interest in CIREF, which was listed on the London Stock Exchange?s Alternative Investment Market (AIM) in May last year. Madison executive director Marc Wainer said on Wednesday Redefine was the single biggest investor in CIREF and that because of this Madison was "taking an active interest" in CIREF.

"Redefine took a decision to invest R100m (in CIREF) and we have to watch that investment," said Wainer. He said that the 50% interest in CIREF?s management company was in effect a "partnership" with CIREF.

Wainer said he and fellow Madison executive director Wolf Cesman had strong relationships with CIREF's management and that Madison had been approached to help CIREF grow.

He said CIREF wanted to make use of Madison's "expertise" in corporate finance and also wanted the South African property asset manager to assist it in takeovers of other UK property companies on AIM.

Wainer said Madison's job would be to "watch" other property funds and "look out" for potential takeover opportunities and advise CIREF. He said Madison hoped to help increase CIREF's market capitalisation from #75m to about #150m to #200m in 12 to 18 months.

Cesman said Madison was "dipping its toes" into the UK market and was happy to partner with CIREF because its management team was "working on the ground" in the UK. Cesman said Madison's market capitalisation had doubled in size from R800m at listing to about R1,7bn.

He said the company's linked unit price closed at R7,00 on December, an increase of 40% on the listing price of R5,00. The unit price is trading at about R8,75.

Wainer said Madison was forecasting earnings of at least 32,5c for the six months to June this year, an 11% increase on the annualised distribution for the year to December 2006.

Angelique de Rauville, MD of Investec Listed Property Investments, said the fact that Madison wanted to acquire an interest in the management company of CIREF might imply that Madison and Redefine were "very comfortable with this investment".

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