By Nick Wilson

Listed property asset manager Madison Property Fund Managers yesterday reported that its distributions for the year to December had surged 30% to 76c per linked unit, compared with the annualised maiden distribution of 39c for 2006.

Increased asset management fees, driven by the unit price movement of the property funds managed by Madison, and the contribution of development fees provided the bulk of this growth.

Madison acquired a development division as part of the acquisition of listed property loan stock company Spearhead by Redefine Income Fund in November 2006.

Madison, which listed on the JSE in June 2006, manages property funds ApexHi Properties, Redefine Income Fund and Hyprop Investments.

During the year under review, Madison acquired a 40% interest in Corovest, the management company of UK-based property fund Ciref, for R100,15 million.

The enterprise value of the companies Madison manages is about R33 billion. Madison executive director Marc Wainer said the company had begun to diversify its income base.

When it listed, about 85%-88% of its income was generated by asset management fees . These fees consist of 0,5% of total market capitalisation and debt of each listed property fund Madison manages.

Wainer said 68% of Madison’s income was now generated from these fees. Madison also derived income from development fees, leasing commissions and property management fees.

The company said it had delivered a total return of 53% for the year to linked unitholders.

Based on its issue price of 500c, the total return since the company had listed amounted to 122%. Wainer said that based on the unit prices of companies it manages, Madison projected distribution growth between 10%-12% higher than the distributions last year.

He said economic and market volatility was expected to continue and could provide corporate action opportunities, as well as the possibility of expansion for Hyprop, ApexHi and Redefine as more properties came up for sale.

Madison was already seeing more properties coming onto the market, albeit at inflated prices. “We are seeing people trying to sell but they are still living in last year,” said Wainer.

Although sellers were still trying to sell their fixed properties at low yields, Wainer expected them to adjust their prices downwards in line with what was happening in the listed property market.

Kundayi Munzara, head of research at Investec Property , said the group had expected good results from Madison and those it had delivered had “surpassed our expectations”.

“It is promising that the contribution from asset management fees to total revenue has been reduced to 68%.” He said that Investec Property anticipated strong growth in Ciref’s contribution to income — which might be a more stable income stream, as the fees were calculated on net asset value as opposed to enterprise value.

“Development fees for the financial year will likely be double those earned last year as it is anticipated that half of the R3 bilion development pipeline of Madison will be completed in this financial year,” Munzara said.

Source: Business Day