Zunaid Moti makes a call on property portfolio

Johannesburg, 14 August 2009 – Zunaid Moti, Chairman of the Abalengani Group states that despite the fact the company is not publicly listed, and as such does not have a responsibility to report to the public, he would like to clarify the current position of the Group. “In my view this situation is normal in light of the current market conditions, where the slump in the property market, combined with a lack of capital and liquidity has contributed to various levels of financial difficulty for many property developers and landowners.”

In response to recent media reports about the status of Zunaid Moti’s and the Abalengani Group’s business with Investec Bank Limited, Moti has stated that their relevant property holding companies are currently experiencing some problems associated to the current market conditions. This is due to the lack of sales in the residential property market, a lack of funding to end-users and in some cases, defaults by tenants.

Moti continues by saying that the higher interest rates experienced over the last 18 months, coupled by the lack of liquidity in the market has also affected the cash flow of most businesses, including theirs. “A significant component of our balance sheet in property lies in non-income producing prime real estate, which relies on capital gain for profitability and cash flow. This consequently adds to the load placed on our cash flow,” he says.

However, Moti points out that the exposure of the Group’s combined property holding companies to Investec is set off against a significant balance sheet. “Also, all of our current creditors are well in our control and no defaults can be reported. It is normal in the current market to restructure more short and medium-term debt to a longer term hold, allowing the market to regain its composure, thereby enabling us to realise our optimum value in the properties”

One such example is the Nondela Drakensberg Mountain Estate development, which is in the process of being restructured into a long term hold with specific regard to the current lack of buyers in the secondary residential market, and the limited funding options available to the end-users. Moti notes that the entire infrastructure on the 1,500ha estate is complete and that the final grow in on the last few holes of the golf course will be completed by October this year.

“As Abalengani primarily focuses on land ownership and creating a platform for development companies and investors to acquire land opportunities in prime areas in South Africa, our other commercial property projects, which are mainly offices and mixed use developments in the Sandton node, will now take the form of joint ventures with developers and investors, where we become the land contributors in most cases,” continues Moti. “However, this will depend on the availability of tenants over the next two to three years. We will however look at developing an opportunity if the tenancy required is secured by a long term lease with a financially sound tenant, or an end-user buyer for offices is identified prior to construction. The Abalengani Group also has other sustainable income producing assets as part of the banking exposures. This will greatly assist us with overcoming the current market conditions.”

Moti concludes by saying that all debt with Investec is secured, even in this downturned market. “As mentioned, this debt is being renegotiated over the long term to ensure that the prime land locations Abalengani has acquired over the last 10 years can be developed, with joint venture development partners, to extract the value in the portfolio during the next property market upswing,” he says. “The property cycle we are experiencing has allowed us to measure our business partners, our risks and opportunities and has certainly given us comfort in the support received by our bankers Investec. I remain very optimistic in the property markets we are involved in and believe that the market will recover during the next five years,” concludes Moti.