‘15 on Orange’ is QPG’s premier mixed-use development in Cape Town estimated to be valued at close to R1 billion on completion towards the end of the current financial year. 

The net loss of R2,9 million for the review period was as anticipated in the revised listing particulars.  Executive Chairman Chaim Cohen explains: “As ‘15 on Orange’ is currently under development, the group was forecast to generate a first-time profit only for the year ahead ending August 2009 and is on track to achieve this.”

The revised listing particulars project revenue for the 2009 financial year of  R107,1 million with earnings estimated to be R387 million (including the fair value adjustment from the revaluation of the ’15 on Orange’ property). “For 2010 revenue is expected to amount to R94,3 million with earnings at R22 million.” He emphasises that these projections relate only to the ‘15 on Orange’ site, and that QPG is intending to grow the group’s asset base before August 2010 to generate greater profitability.

He says cash flow requirements in the year ahead will be met by the capital raised on listing and external finance facilities already secured.

‘15 on Orange’ is progressing on schedule and will include a flagship 5-star hotel as well as 12 luxury penthouse apartments, boutique shopping and a 4-storey parking garage. CEO Gary Itzikowitz points out that QPG has no exposure to the currently weak residential market, as the 12 luxury penthouse apartments were pre-sold at a substantial gross profit for the group of R24 million. 

He says the development reflects the group’s three-pronged growth strategy.  “Our business model is structured to achieve regular income from developments, earn predictable recurring revenue from rentals and balance this with opportunistic profits from trading in properties,” says Itzikowitz.  In addition to the once-off revenue generated from the sale of the penthouses, the ‘15 on Orange’ hotel will yield ongoing revenue for QPG from leasing and operating the 129-suite hotel in partnership with Protea Hotels.  Annuity income will further be generated by rentals of retail space and from the parking garage.

Commenting on the current state of the property market Itzikowitz points out that adverse conditions can work to QPG’s advantage.  “The high interest rate environment coupled with the global credit crisis is exposing value-invested acquisition opportunities at fair value,” he says.  “Leveraging the significant experience of our property executives we will be able to identify and secure those opportunities to deliver growth for shareholders.”  QPG’s senior directors have

developed many landmark projects in South Africa to date totalling more than R4 billion. 

Looking ahead Cohen is confident that QPG’s enhanced profile and access to scrip subsequent to the listing, underpinned by management expertise, will enable the group to accumulate a quality portfolio that will generate capital growth for shareholders. “Our three-pronged growth strategy is set to build a strong portfolio with diversified revenue streams that will position QPG for sustainable growth.”

Cohen is realistically optimistic about QPG’s prospects.  “As directors we have each weathered at least two or three down cycles over the past two decades, and are not fearful of a difficult economic environment in light of our proven records of consistent success even in negative conditions.”

He says it is too early at present to quantify the full impact on QPG, if any, of the current world market turmoil.  He concludes that the group is competitively positioned to raise future capital for acquisition and development opportunities despite the credit crunch, referring to the directors’ established relationships with banks through their past property developments and QPG’s own history of successful capital raising.