Capco property investors richly rewarded

Johannesburg - South African investors in British property company Capital & Counties (Capco) who held on when it was unbundled from the former Liberty International in May 2010 have been richly rewarded.


Property analysts are confident that continued unlocking of value in the group’s prime properties in central London with be to their further benefit.


Shareholding in Capco by South African investors, including the Gordon family, is currently at 22%. The rand share price of this company, which is listed both in London and on the JSE, last week reached an all-time high of R31.58, from R14.35 on May 10 2010.


That's a 120% increase. “In the year to date the rand-hedge element of Capco has produced an additional yield of between 10% and 15% for South African investors compared with returns in pounds,” said Coronation property portfolio manager Anton de Goede.


He attributes this to the value so far unlocked in the company’s Covent Garden properties and progress with planning approvals for the Seagrave Road and Earls Court development sites. “London is increasingly regarded as a safe haven and Capco is benefiting from this,” said De Goede.


Capco chief executive Ian Hawksworth says the biggest value unlocking is in the 28.5ha-odd land that the company owns in Earls Court in the heart of London. This land was bought for £15m/ha and is currently worth £22.5m/ha. He said when all the planning approvals have been obtained its value will probably double.


The company spent £30m on the master plan for the development, which includes 808 dwelling units on the Seagrave Road site and almost 7 000 residential units in four “villages” on the Earls Court site. The Seagrave development will be approached in a 50/50 enterprise with entities of Hong Kong’s Kwok family.


Hawksworth says it's a unique development opportunity because the site adjoins some of London’s most luxurious residential addresses, including Chelsea, Kensington and Fulham. There is also a 300 000 waiting list for ordinary accommodation in London, which reflects the structural undersupply of all categories of accommodation in the British capital. “Last year fewer new houses were built in London than there were in 1920.” He said this makes the city’s residential market the place to be.


These developments will lead to 12 000 permanent jobs.


Capco is on its way to convert Covent Garden, which attracts more than 43m visitors a year, into one of London’s most prestigious shopping areas with unique retailers of luxury goods.


Hawksworth said that since the unbundling more than 50 new brands have been brought to Covent Garden and they are prepared to pay a premium for space there. Over the year to date retailers’ turnovers have doubled.


The newest shops are Chanel’s only free-standing beauty store in Britain and 7 For All Mankind.


He expects significant growth in market rentals in the area, which are still far below average market rentals for central London. Capco’s target is to push this up to £50m by the end of next year. At the end of June it was £47.1m and in 2009 £33.2m.


Hawksworth said the properties in Covent Garden comprise 52% of Capo’s assets and there are plans to expand them further.


The company recently placed 68.4m new ordinary shares, netting it £149.1m. This, with an additional £50m in cash, will be invested in property assets in the area.


De Goede said London’s status as a safe haven is not entirely risk-free. “The capital that has flowed into the city in recent times could flow out again when the global economy recovers.” This could put the residential market under pressure and impact the execution of the Earls Court plan, he said.

Fat Cat Property mogul stumbles in R4.6bn syndication rescue

Nic Georgiou fails to transfer buildings worth billions.

JOHANNESBURG - A plan by apparent property billionaire Nic Georgiou to repay R4.6bn to about 18 000 investors has got off to an inauspicious start. Nine months into the plan, Georgiou has failed to transfer properties worth billions of rand to provide security to investors.

The rescue plan is for eight syndication schemes sold by Pickvest (formerly PIC Syndications). These syndication companies were placed under business rescue late last year. Investors accepted a proposal by Georgiou to repay them after five years. See: R4.6bn Pickvest rescue hinges on property billionaire.

Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.

As part of the rescue plan, Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch. This would provide investors with some security should Georgiou fail to meet his obligations.

However, nine months after the rescue plan’s adoption, most, if not all, of the properties have not yet been transferred into Orthotouch’s name.

Orthotouch legal adviser Theo Koutsoudis has declined to comment on the failure to transfer properties. Says Koutsoudis: “I confirm that I am at this stage not authorised to divulge any information suffice it to state that the Business Rescue Plan is proceeding despite efforts to derail the process by persons pursuing their personal agendas.”

Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.

Koutsoudis has similarly declined to comment on what money from the sales of the above properties was used for.

There has also been a shakeup at Orthotouch board level. Chairman Jannie Nel recently had his services terminated. Nel declined to comment on his departure from Orthotouch.

Nel’s departure leaves Orthotouch with four directors: Nic Georgiou, Panos Kleopvoulou, Hans Klopper and Connie Myburgh.

Under the rescue plan, Georgiou, through Orthotouch, promises to pay investors in the syndication companies a reduced monthly income for five years. At the end of the five-year period, Orthotouch promises to repay investors their full R4.6bn. See: Pickvest: Billionaire gets five years to repay investors.

The success of Orthotouch will depend on the directors’ ability to increase the net value of its property portfolio to R4.6bn after five years. Inflation will assist the directors with this task but will also erode the value of the final payment to investors.

There is a concern that by selling the buildings mentioned above, Georgiou is eroding the total value of the assets that are pledged to Orthotouch, reducing the likelihood that their net value will ever reach R4.6bn.

Prior to publication a copy of this article was sent to Koutsoudis. He was invited to correct possible factual errors and offer any comment he may have. Koutsoudis responded:

Dear Julius

Your draft article is fraught with inaccuracies and innuendos. Your quote from my email states clearly that the Business Plan is proceeding. It follows that all funds are being utilised in terms of the Business Plan. Your statement that "Koutsoudis has similarly declined to comment on what money from the sales of the above properties was used for" is clearly therefore inserted purely for sensationalistic reasons.

Neither I nor the Board are prepared to make any further comments at this time, and certainly not within the time you stipulate.

All our rights are reserved.

Yours sincerely
Theo Koutsoudis

Curious about your commercial property energy consumption?

Ever curious about your commercial property energy consumption? 

Well now you can check with the Green Building Council of South Africa's (GBCSA) Energy and Water Benchmarking tool that measures a building's consumption that are according to industry norms. 

The pilot version and fifth tool developed for the South African market analyses existing building performance, and allows property managers to see how their buildings measure up in terms of energy and water consumption. 

'This tool is powerful in assisting property owners to decide which properties to retrofit or sell, as well as being a useful marketing tool for star performers in a portfolio,' says GBCSA Technical Executive Manfred Braune. 

'According to our calculations, energy consumption has increased from R8.66/m² to R30.46/m² over the past five years, in the case of some large office tenants,' notes Growthpoint Properties' Office Portfolio Divisional Director Rudolf Pienaar. 

'Any efficiency we can achieve in order to keep costs down will benefit our tenants. The benchmarking tool will no doubt be of similar use to the property industry in general. 

A combined focus by all property owners on reducing consumption will be of benefit to all occupiers of property, and contribute to a much-needed reduction in national consumption,' adds Pienaar

Source: thepropertymag