Madison Development increases current portfolio to R3 billion

Posted On Wednesday, 27 February 2008 02:00 Published by
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Fulfilling a prediction made in May 2007, Mike Flax, Executive Director of Madison Property Fund Managers, maintained at a recent talk that the Madison team is now by far and away the most active – and possibly the largest – of South Africa’s property developers

Reeling off a list of figures, Flax revealed that Madison now has:

•   just over 30 projects under construction;
•   these have a combined value in excess of R3 billion; and
•   R1,6 billion construction work will be completed this year.

Flax added that:

•   Madison work is generating employment for over 50 independent professional firms; and
•   will earn R40 million in development management fees to Madison this year. 

The average fee, said Flax, is around 2,5% of the total construction cost and this represents “exceptionally good value” for the various managed funds for which Madison is working.  I has also enabled Madison to sign arrangements with external clients such as the New York based Lehman Real Estate which is partnering Madison in their expansion into Africa.

The latest breakdown, said Flax, shows that 49% of the company’s projects are in retail, 32% in office and 19% in industrial, hotel and mixed-use projects.  Not surprisingly, perhaps, all the current projects are in Gauteng and the Western Cape, but Flax revealed that in the not-too-distant future he would be announcing new projects in Namibia, Angola and certain other South African provinces.

As was planned from the start, Madison provides development services to its listed property funds under management:  Hyprop Investments Limited, ApexHi Properties Limited and Redefine Income Fund.

Heading the Hyprop list right now, said Flax, is the new R 200 million Southern Sun 4 star Hyde Park Hotel in the Hyde Park Shopping Centre and a 20,000m2 expansion to Canal Walk.

Apex-Hi, said Flax, is sticking to its retail base, with the result that Madison is now, on its behalf, handling major refurbishments, and in some cases extensions, on The Village in Horizon retail centre (West Rand), the Maynard Mall retail centre (Wynberg, Cape Town), Kempton Square (Kempton Park), Golden Walk (Germiston), Moreleta Plaza (Pretoria) and Ermelo Mall (Ermelo).

Redefine’s current projects include phase two of the CTX Business Park and Golf Air Park, both near Cape Town International Airport, phase two of Upper East Side mixed use development in Woodstock, a mixed-use scheme in Annandale, the third and last phase of the A-grade Knowledge Park office complex at Century City and the new R350 million Kempton Park shopping centre in Gauteng.

The leadership roles on Madison developments, said Flax, are now split amongst six senior development managers, the latest recruit being Rob Horsfield who, like many South African development managers, has returned to South Africa from Saudi Arabia, where he acquired in-depth experience on mega-retail and mixed-use centres.  The Madison senior development team, said Flax, is now particularly well rounded and well skilled as it employs two architects, an engineer, a lawyer, a quantity surveyor and a chartered accountant.

Flax said that he was particularly pleased with the relationships that had been established with leading property developers in joint venture deals.  Among those he named were Giancarlo Lanfranchi (of Swish Properties), Mark Ruffley (Ruffley and Assoc.) and Joe Davidowitz (of Polydev).

So where is the Madison development team now heading?

Flax said that the office and industrial market still has “good legs” and he sees rental growth in these sectors remaining strong for at least four years.

“The fact that Redefine’s newly completed Convention Tower on the Foreshore in Cape Town will be give an 11,5% return in its first year despite building cost rises of almost 1,5% per month throughout the construction period is a fair indicator of the strength of the current commercial market,” said Flax.

At the same time, however, he predicted that cutbacks in residential and other developments by the less well-resourced smaller developers could now put downward pressure on building costs and provide welcome relief from the ongoing building cost price rises.  On the other side of the coin, he said, the increased cost of capital employed by the listed property companies (caused by the recent drop in their share values) will make it essential to continue to watch costs carefully if projects are to remain viable.

Wrapping up his talk, Flax said that with a record volume of work currently on the go and in the pipeline, Madison will be able to provide ongoing construction opportunities into 2010 – and beyond. 

Publisher: eProp
Source: Madison

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