South African property asset manager has to cancel offshore offering after big investors withdraw, early investors to get money back - top exec. JSE-listed property company Madison Property Fund Managers Holdings Ltd (JSE: MDN) announced this week that it will not be going ahead with the listing on the Bermuda Stock Exchange of their proposed Phoenix Global Investments Fund.
In a written statement, Mike Flax, executive director at Madison said the cancellation was due to the disappointing results of subscriptions in the Initial Public Offering (IPO) which fell short of the Madison's self-imposed minimum level.
Although Madison could not disclose how many people had subscribed for the shares of the new fund, it confirmed that all investors will be reimbursed and said there would be no implications for shareholders as a result.
"In the best interests of shareholders, we were mindful of the fact that capital raised would not have provided significant enough asset base to fulfill the diversified strategy as communicated in the Prospectus and during our investor presentations," said Flax.
He explains that this was largely as a result of certain high-profile although totally unrelated events that coincided with the Phoenix IPO close. This then created investor uncertainty and nervousness and contributed very significantly to the decision taken to cancel the listing.
At one stage, it seemed that it would comfortably exceed the USD200m target it had set itselves - with the response from individuals with whom it had worked previously "particularly positive". At the eleventh hour, due to two major institutions deciding to withdraw, wrote Flax in a statement.
Flax added that the cancellation this has not changed the company's view that there still are excellent offshore listed property investment possibilities available in line with its original strategy.
While other offshore property investment opportunities are being cancelled, last week Barnard Jacob Mellet (BJM) and Cornerstone Asset Management launched British Capital Investments to capitalise on value opportunities in the UK property market.
BJM reckons that South African investors are well placed to exploit the upside potential by current market inefficiency which adds to the timing, rand hedging, diversification and capital growth opportunity at an affordable level.
British Capital is registered in Guernsey and will be listed in Bermuda Stock Exchange, dependent on the listing approval, the offer to subscribe opens in July and closes at the end of August.
Evan Jankelowitz, co-head of Stanlib Property Franchise, told Realestateweb.co.za that it is unfortunate that Madison was unable to raise enough capital for the listing of the Phoenix Fund.
However, Madison has a good track record and its failure to raise enough capital does not mean that all offshore property opportunities lack potential or will fail. The doors may have closed on the Phoenix fund but not on the entire offshore property investment market, Jankelowitz points out.
Commenting on the cancellation of the Phoenix Fund, Niel Harmse, research analyst at IPD SA, says a strong currency is essential if one is looking to invest effectively offshore. The relatively weaker rand could thus be seen as one of the possible factors.
For example, the latest IPD Global Index indicates that investing in the South African commercial property would have provided a return of 13.0% in Rand terms whereas in sterling, the return would have been 15.6%.
"Many investors are employing a wait and see approach at the moment as it's not yet clear if the global economy is recovering as expected," Harmse said.
According to Standard & Poor's Global Property & REIT Report for the first quarter of 2009, Property and REIT companies are hard-hit by the global crisis and those overwhelmingly negative economic indicators will continue to dominate the real estate sector. Fear and uncertainty are emerging as major factors holding back revival for property and REIT stocks.
moneyweb
