Phoenix Chairman puts reasons for confidence in new fund

There are, says Jim Shankland, Chairman of the new Global Phoenix Property Investments, good reasons for the launchers of the fund, Madison Property Fund Managers, being entitled to claim that there are few better investment opportunities in South Africa today.

Phoenix, which is now raising capital, plans to invest in eight to ten listed property companies, initially in the UK and Australia, thereafter in Europe and possibly the US. Having just printed their prospectus, they are now canvassing the market for US$200 million.

Shankland says that among the good reasons for supporting the fund are the facts that:

The managers are among the most respected in South Africa today. On the board are Marc Wainer, Wolf Cesman, Mike Flax (who initiated the fund), Gerald Leissner and Brian Goldberg, all of whom have been involved in property all their lives and who are recognized leaders in the industry in South Africa.

“This is a group of far-sighted individuals whose track record in property is possibly without equal in South Africa,” says Shankland. “Furthermore, all of us on the management team, including myself, have good connections with like-minded colleagues in major international financial institutions who will, we are confident, introduce us to opportunities throughout the areas in which we are to operate.”

The management team will, with one exception (Jim Shankland himself), all be based in South Africa where they have well-known reputations to protect. This, says Shankland, is particularly important because the vast majority of the shareholders are likely to come from South Africa and the fact that the management team’s credibility will be at stake is highly significant.

“You can take it from me that they will not allow themselves to be associated with anything that might not live up to their promises,” he says.

The directorate are themselves all investing in Phoenix heavily.

“The original plan drawn up by Mike Flax was for himself and a few friends to invest - but it was then realised that to achieve the impact and the spread that they seek, they have to have more substantial funds available.”

At least one major South African financial institution, says Shankland, is showing great interest in becoming one of the initial funders.

Right now, the First World listed property companies, says Shankland, are trading at 70% plus discounts to their previous prices. This means that whoever buys now can get into excellent portfolios at exceptionally good prices. (Shankland commented that without downplaying the potential of many of the emerging markets, e.g. China and India, the First World listed property companies remain the preferred choice for those who are on the whole risk averse. They are, he says, still the “safe houses” in the investment world.)

The Phoenix portfolio will be diversified geographically, sector-wise, between commercial, retail and industrial and of course as regards currency. This diversification, he says, will make Phoenix’s risk profile a good one.

The investigations of companies into which Phoenix will buy will be thoroughly handled and will involve not only the management team but a number of reputable consultants. With such a wide range of choice, the final selection, says Shankland, is likely to be good.

Shankland added, as he sees it, that the First World Economy is set to recover from the end of this year onwards - already, he believes, the stock markets are showing the first signs of taking this into account. Now, therefore, he believes, is exactly the right time to launch a fund of this kind.

Asked to predict the likely returns from Phoenix, Shankland said that he definitely did not want to be pinned down on this matter. Nevertheless, it has been said by most of the management team that a return in excess of 30% per annum compounded is possible.

“It is not my nature,” says Shankland, “to make bullish and optimistic forecasts, particularly when other people’s money is at stake - and there are a number of difficulties to be overcome before a full scale recovery is on the cards - but with this management team behind it and at this time I can think of very few more promising investments than the new Phoenix offering.”

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