21 Jun 2004 :

Mike Flax, the Chief Executive Officer of the JSE Securities Exchange listed company, Spearhead Property Holdings, has stressed in a recent press interview that he remains convinced that Spearhead's policy of sticking to an "internal management" which results in "goal congruency" between the company and its executives has been a primary reason for Spearhead’s ability to perform way above the average for its sector on the JSE Securities Exchange.

"I know that outsourcing of the management function has been done by most other funds," said Flax, "but at Spearhead we would worry that if owners step aside and allow management companies to operate on their behalf, there could all too easily be a conflict of interests.

"Semi-independent managers without a stake in the company might well, as we see it, do things not in the long-term interests of the shareholders, especially with regard to asset acquisitions and disposals.

"Owner-managers, by contrast, will look first and foremost at the bottom line of the fund - and all their decisions will be guided by how this will be affected.”

Although Spearhead has been involved, with partners, in the last year on two large, highly successful residential projects - South Seas at Mouille Point and Wembley Square on the western fringe of the Cape Town CBD - they will, said Flax, continue to see this type of opportunity purely in trading terms - a fairly quick in and out operation - but will continue to buy and upgrade their retail, commercial and industrial portfolio. Here they will hold onto properties for a considerable time.

An investor buying into Spearhead today, said Flax, can safely expect a rental yield of 12% on its Cape Town based portfolio. By contrast the average residential property is still giving only a 3% to 6% return.

Retail space, said Flax, has for a decade been the best performing property type in South Africa. Now, he says, the prospects for office and industrial space throughout SA are looking promising because of the growth in the economy, because of residential developments in the CBD (which have resulted in many thousands of square metres being converted for residential take-up) and because almost no new office space has been developed recently in the CBD.

"In the next five years we believe it is quite possible that office space will begin to show real sparkle," said Flax.

These perceptions of the market had, said Flax, been behind Spearhead's decision to launch the 30 000m2 Spearhead Business Park in Montague Gardens, now in its third and final phase and the 35 000m2 business and retail park, Sable Square, next to Century City, to be launched in July. It has also led to their paying R48 million recently for the high tech office complex Knowledge Park, also part of the Century City set up.

For further information contact Mike Flax on 021 425 1000.