Nick Wilson

Property Editor

Madison Property Fund Managers said on Monday that its distribution growth was not as high as it initially expected due to a large fall-off in listed property values since the beginning of the year.

Madison, the largest listed property fund manager, which is responsible for the asset management of listed property companies ApexHi Properties, Redefine Income Fund and Hyprop Investments, derives its income from the listed property funds’ enterprise value.

Marc Wainer, executive director of Madison, said that the company’s interim distribution of 39c a linked unit for the six months to June represented an 8,3% increase, compared to the prior distribution period.

Wainer said that at year-end in December, Madison had been looking at a 10% to 12% distribution growth for the 2008 financial year.

But from January, the company saw the unit prices of its listed property funds come under pressure along with the rest of the listed property sector, Wainer said.

This was particularly so in April, May and June, when the listed property sector lost more than 30% of its value due to the high interest rate environment and general global market woes.

Wainer said Madison made up the 8,3% growth from quite a number of other sources and that its investment in the management company of UK based property fund Ciref, which is listed on the London Stock Exchange’s Alternative Investment Market, did “very well for us”.

Madison owns 34% of Ciref’s management company, Corovest Fund Managers.

“If you look at our prospectus for the full year to December, we are looking at a distribution of 41c to 43c for the rest of the year, which will take the total distribution to between 80c and 82c, whereas previously we were looking at 84c or 85c,” said Wainer.

He said the revised distribution expectation was based on the provision that unit prices remained stable at “more or less current prices”.

Wainer said the listed property sector had recovered “quite nicely” since the end of June.

But he said part of Madison’s strategy was to “hedge” this by increasing its exposure to international markets, which had “done well for us”.

“Rand-hedged earnings from Corovest are anticipated to grow and Madison is pursuing local and offshore opportunities for the company and its managed funds.

“Each step we take into the international market opens up even more opportunities for Madison,” said Wainer.

During the period, Corovest acquired 50% of Wichford Property Management. Wichford is the property manager of London Stock Exchange listed property company Wichford.

As part of its income base diversification, Madison now has contractual income from its three South African- listed property funds, contributing 68,6% of total revenue for the interim period.

This represented a significant reduction from the 73% and 80% for the corresponding 2007 and 2006 periods.

Source: Business Day