Pangbourne is one of the oldest JSE property companies, having listed in 1987, and is one of only four listed funds that are internally managed.
The market capitalisation of Pangbourne as at December 31 2006 was R3,539bn, with total property assets of about R4,2bn. Its historic rolled yield is 7,4 %, against the sector average of 7,2 %. Pangbourne recorded a total return of 23,05% in 2006 (compared with the SA listed sector at 28,36%).
Pangbourne handles the entire property management, asset management services and financial and corporate administration functions itself, as well as providing these functions for its associated funds.
Pangbourne advocates a multi-fund strategy, owning both direct property (about 80% of assets), as well as stakes in other specialist listed property companies (about 20% of assets).
The multifund approach is a unique model when compared with traditional property companies listed on the real estate sector of the JSE. Though it is unique in the SA environment, it has proven to be a successful model in global markets, specifically America and Australia.
Pangbourne's revenue streams are split between rental income from the direct property portfolio, income distributions from the listed investments (in iFour, Siyathenga and Calulo) and fee income from the underlying funds (including Paforma, which is an unlisted residential property finance company in which Pangbourne has a 70% stake).
In 2006, a small component of revenue was generated from fees for listing Siyathenga, facilitating and warehousing a portion of the Transnet Retirement Funds Property Trust (TRFPT) portfolio for Siyathenga, plus from capital profits on the sale of noncore properties and listed securities.
The strategic stakes in its sister funds means that Pangbourne can supplement its property rental revenue and listed investment distributions with the asset management and property management fees it charges these funds for the services it provides.
Pangbourne also has the borrowing capacity to warehouse (buy and hold) properties or partner developers, on behalf of its associated funds. Pangbourne charges fees to the underlying funds for facilitating these types of transactions. In 2005 and 2006, about 80% of revenue came through contracted rentals and income distributions from the underlying listed investments, and 20% from fees charged to associated funds.
This model gives investors a choice of gaining exposure to a specific property sector (via the specialist funds) or to the property sector as a whole (via Pangbourne).
Pangbourne has an asset value of about R4,2bn, made up of R3,2bn in direct property and R1bn in listed property investments. The majority (74%) of the direct property portfolio exposure is to the industrial sector, with smaller exposures to the retail (7%) and office (19%) sectors. It has higher see-through exposure to office and retail via its listed investments.
iFour has historically been exposed equally to the retail, commercial and industrial sectors, but its long-term focus is to increase exposure to non-metropolitan retail centres. Siyathenga is a retail-focused fund with exposure to lifestyle and large neighbourhood shopping centres. About 63% of Calulo was aquired by Pangbourne during 2006, and this fund will focus on the office sector.
Through its association with its sister funds, Pangbourne has influence over about 8,15% of the SA listed property sector.
Pangbourne has secured a development pipeline of about R1,5bn. This includes properties to hold as well as to sell on to the associated funds. The bulking up programme of Calulo should also result in more management and facilitation fees for Pangbourne.
The industrial market has performed exceptionally well since 2002. Supply constraints in this market should result in this sector continuing to perform well.
Pangbourne should benefit in coming years from its large industrial exposure. In addition, the acquisition of the TRFPT portfolio should enhance both Pangbourne's overall quality and earnings prospects. With a large component of its revenue coming from nonlease income streams, however, the earnings profile of Pangbourne is likely to be more volatile than the average fund.
The fund has underperformed the sector in recent years, and recorded distribution growth of 7,3% for the year ended June 31 2006 (compared with a sector average of 10%-12%). Management recently issued a trading statement that it was expecting distribution growth for the interim period to end December 31 to be 10%-12%.
Pangbourne is suitable for investors looking for exposure to the industrial sector, income distributions and fee income from the underlying strategic listed investments, as well as the potential advantages coming from the fund's development pipeline.
