Property Partners branch out into underwriting property transactions.

Posted On Monday, 07 June 2004 02:00 Published by
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Product targeted at property development industry

Property Partners, the Cape headquartered property financiers, who started out 12 months ago providing mezzanine finance and taking private equity positions in selected property transactions, have now gone a step further along the road to providing a more comprehensive product to the property development industry.

Stuart Chait, Chief Executive of Property Partners, reports that he and his colleagues have been able to capitalise on their association with several substantial local and offshore investors to arrange for them to underwrite property transactions. This new service will come into operation where the developer falls short of the often-stringent equity requirements of the banks.

"As we all know, for very good reasons," said Chait, "the banks seldom finance more than 70 or 80% of a development, leaving the developer to find 20 to 30% in equity. On an office block costing R50 million, the banks would typically insist that R10 to R15 million be provided. This makes life extremely difficult for developers and traders who are often not well resourced, as their capital is tied up in other developments. However, many of the projects coming off the drawing boards in the Cape and Gauteng are, in our opinion, viable and deserve to be given the go-ahead, provided they will be well managed."

In cases of this kind Property Partners, said Chait, will consider underwriting projects that they believe are financially sound.

Chait says that in 90% of the cases the underwriter’s guarantees will probably never be needed – but it will be a wise move on the bank’s part to make provision for them. Property Partners’ input, if called upon, would be converted into equity and profit sharing. If not called up, the underwriter would be paid a fee for making the money available. This would in most cases be a stipulated percentage of the development profit.

Property Partners, said Chait, will insist on being involved in the structuring of deals to make these efficient, to eliminate the risk of foreign exchange fluctuations and to ensure that the deals are as profitable as possible.

"We have over 100 years property management and development experience in this office," he said, "and it would be foolish for clients to ignore this expertise which will be offered as part of the deal."

 

For further information please contact Stuart Chait on 021 670 5050.


Publisher: Property Partners
Source: Property Partners

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