Madison, South Africa’s largest property asset manager, derives its income predominantly from the asset management of three leading and highly differentiated listed property funds – ApexHi Properties Limited, Hyprop Investments Limited and Redefine Income Fund Limited – which have a combined market capitalisation of R20,4 billion and a combined enterprise value, which is market capitalisation plus debt, of R26,2 billion at year end. This represents a growth in Madison’s assets under management of 35,8% since 30 June 2006.  Madison Property Fund Managers director Wolf Cesman explains that “Madison’s robust performance can be attributed to the increase in contractual income arising from the increase in the linked unit prices of all funds under management, especially from October 2006, and other income generated by Madison being higher than expected”.  Revenue, comprising contractual income of R82,9 million and other income of R19,5 million exceeded forecast by 5.2% and 34.8% respectively. Contractual income accounted for 81% of total income compared with the forecast of 84.5%. Net interest income of R6,2 million was significantly higher than forecast. Proving suitably liquid, 75,2 million units traded on the JSE Limited from date of listing on 7 June 2006 to 31 December 2006, equating to 69.4% of the weighted average number of linked units in issue during the period.

Madison’s linked units closed at 700 cents on 31 December 2006, an increase of 40% on the listing price of 500 cents and a recovery of 79% from the low of 390 cents on 18 July 2006. Madison’s linked units closed at 875 cents on 12 February 2007, equating to a market capitalisation of R1.72 billion, an increase of 81% since listing.

“Madison is confident that its strong performance will continue and, subject to market conditions remaining stable, distributions for the six months ending 30 June 2007 should be approximately 32.5 cents, an increase of 11% when compared to the prorated distribution for 2006.” says Cesman.

Marc Wainer, director of Madison explains that ApexHi, Hyprop and Redefine are continuing to grow their portfolios which should enhance enterprise values and consequently increase the asset management fees to be earned by Madison. “The development and leasing divisions absorbed as part of the acquisition of Spearhead by Redefine will contribute to other income in the forthcoming year,” notes Wainer.

Securing the relevant skills, which will be key to these functions, Madison issued 6,5 million linked units, subsequent to year end, as sign-on bonuses to two newly appointed executives: Michael Flax, formerly of Spearhead, was appointed director and Janys Finn was appointed chief financial officer. These linked units do not rank for the maiden distribution.

“Madison will initiate and manage development projects on a fee basis for its funds in its role as asset manager, rather than on-sell developments at a mark-up as many other asset managers do,” explains Wainer. Madison will also provide this service to select private clients. The company is currently managing several developments for Redefine including the Pepkor warehousing hub in Isando and Convention Towers in Cape Town. Madison, which constantly seeks new and innovative ways to responsibly grow the size of funds under management, has also reached an agreement to acquire 50% of the management company of Coronation International Real Estate Fund (CIREF) which is listed on the London Stock Exchange’s AIM (Alternative Investment Market). Earnings are initially expected to be neutral but will be enhancing in the future and the deal is subject to South African Reserve Bank and Madison board approval.  “Madison will bring its corporate finance expertise to the existing property-focused management team with which we have a good working relationship, having previously been our partners in Hyprop and with Redefine being the largest single shareholder in CIREF,” says Wainer.

Furthermore, with the increasing globalization of property, Wainer sees the absence of exchange controls with the next three to five years. “Now is the time for asset managers to position themselves in order to incisively advise funds under management. Ciref is a small fund now, but has good growth prospects and we see the opportunity to grow our knowledge with the fund,” says Wainer.  Madison will pay its maiden distribution to linked unitholders on Monday, 12 March 2007.