Capital Investments Improving Investment Product

According to information released by property portfolio management company, Capital Investments, they are offering a much improved investment product and also sorting out the problems of one of the country’s major syndicators.

Managing Director of Capital Investments, Jurie Wessels explains that they started out doing syndications but realised that the model wasn’t sustainable for the management company or the investor. He added that an investor does not want to be locked into an investment in a particular property, or group of properties, without the ability to use gearing to expand his investment portfolio. An investor would also want the option to trade out of some properties and into new properties as the area demographics change.

“Our investment model is actually very simple,” says Wessels, “We only invest in commercial properties – office blocks, industrial property and retail space. The properties in our portfolio are geared with bank-issued property bonds. As the rental income repays the bonds, we take the money out of the bonds again and buy additional properties. It is this ability to add properties without receiving new investments that really enables us to add to our clients’ wealth, much more so than the normal, inflation-linked increase in the value of the existing buildings in the portfolio. Syndications are structured to own particular buildings; they are structured not to have this ability.”

Capital Investments recently issued a cautionary announcement on all of the syndications under their management, before they took over the management of the syndications previously owned by Dividend Investments. Details of the proposed transaction cannot be supplied before the relevant information has been distributed to investors, but Capital Investments has confirmed that the structure of the existing syndication will change.

Wessels further explained that syndications make their money when they structure and market the original syndication. Because there is no further fee there is also no incentive for the company or promoter to manage the syndication with the necessary care. According to Wessels this could be seen in the poor quality of the records and poor state of management they encountered when they took over the syndications.

Wessels went on to say that they saw an opportunity when they took over the management of the syndications that had been put together and marketed by Dividend Investments. They want to unlock the value for investors because most of the properties in the syndications were good properties but they needed to improve the management and the financial affairs of the syndications owning them.

Wessels said that they are very proud of what they have achieved in a very short time to bring the affairs of the syndication up-to-date. He explained that they spent a vast amount of time and money to record old transactions and bring records up to date, trace the flow of money between companies in the group, settle inter-syndicate loans, conduct audits of share registers, and update them. They also supervised proper maintenance of the buildings and re-established good, professional relationships with syndication property tenants. The team also recovered as much unpaid rent as possible and let empty space to reduce vacancies appreciably. All of this, Wessels said, had to be done for the more than 70 syndications, altogether more than 160 companies, in the group.

“While we cannot deny that investor interests were sometimes neglected by our management predecessors, we can assure syndication investors that Capital Investments is doing everything in its power to obtain the best possible results from the current situation. In addition, we have to reassure the investing public that the investment advice they received from their financial advisors was sound, based on the available information, at the time. The situation that Capital Investments is rescuing was created by poor management of the syndications by the original promoter.”

Capital Investments wishes to remain transparent in its dealing with the syndications and is meeting with the syndications members. Wessels reassured syndication investors in a recent letter, that a transaction will only be concluded once all members have received full information and given their approval.

(The information in the article is with courtesy of a Press Release by Capital Investments on 7 October 2006)

Buy property for sale in South Africa