WHILE the modern style of public property syndications has reduced to a trickle compared to the heady days of the mid-90s, old-style private property syndications, at least for the Louis Group, continue apace.
This week the Louis Group announced that it had completed its 30th property syndication since moving headquarters to Cape Town eight years ago.
According to a company announcement, applications for the R20 000 units in Belvedere Square, at the corner of Belvedere and Keurboom streets in Claremont, were oversubscribed by 180% for the property which had been purchased only a few months ago.
Until the Louis purchase, Belvedere Square had been struggling to cope in the face of persistent vacancies and tenant turnover. However, this changed, according to the announcement when Woolworths agreed to take up over 400m2 for a food store for the next 10 years. Louis says that they now have applications for 165% of the trading area.
The new owners are planning construction of a further 500m2 of retail space to add to the existing 1511m2 of trading area, 516m2 of office space and a similar area of residential space. Parking is to be increased by 20% with a general upgrade planned for the entire complex.
The company forecast is that investors will receive an in excess of 20% return on equity per annum.
At the same time as concluding the purchase of Belvedere Square, Louis recognised that the increased traffic which would result from the new developments would have a spin off for neighbouring properties. The company acquired Belvedere House, the retail building immediately opposite Belvedere Square, and signed a 10-year lease with anchor tenant 7-Eleven.
Louis Group's previous syndication was 47-On-Strand, the purchase conditions of which included a long-term lease back by the seller of a large proportion of the lettable space.
The company points out that each one of its syndicated properties is delivering double-digit returns on investor equity with several of the earlier syndicates earnings in excess of 30% per annum.
Dr Alan Louis, CEO of the Louis Group, gives several reasons for the success of the Louis Group syndications. 'We never purchase overpriced, over-the-top, high-profile buildings with only prestige and architectural magnificence to recommend them. Our buildings are generally well positioned, solidly tenanted, second-tier structures, but well built.
'The price has to be right which means that we can engineer gearing on the property to maximise returns on investment so we never have to subsidise rentals. All our properties have positive cash flow and earn interest on cash balances.'
Louis said the major reason investors clamoured to invest in syndications was that the Louis Group always purchased the buildings outright and retained a major stake.
Publisher: Weekend Argus
Source: Weekend Argus
