1. Net income

The investors receive the net income of the Company. The net income of the Company is calculated by adding the interest on positive bank balance to net rental income.

2. Income yield

The income yield for the investor is calculated by dividing the net income received from the Company for the year by the initial investment paid for the units. This yield will differ from investor to investor, as the amount paid for the units will differ from investor to investor, and transaction to transaction.

3. Capital growth

The investors receive capital growth through increase in the value of the units. The value of the units are influenced by the growth in the value of the property and the escalation of the yearly net rental income.

4. Value of units

Modern property investment analysis has generally adopted the discounted cash flow approach to valuation. The main benefit of this approach is that it measures the cash flow throughout the investment as well as the impact of the reversion at the time of the sale of the investment. Another benefit of this approach is that it takes into account the time-value of money.

Still the final market price paid for a unit will always be determined by supply and demand and market conditions.

5. Resale of units

As every astute investor knows, an investment in property must be regarded as a long-term investment. The recommended investment period is not less than five years. This Property Investment Company is not governed by the 10-year projection provided and unitholders may decide to hold their units for a longer or shorter period, or they may accept an offer for the entire property.

Should an investor wish to sell a portion or all of his investment, the promoter will assist wherever possible to effect such a sale at a market-related commission on the investor’s behalf.

Investors are able to sell privately if they wish and a nominal administration fee will be charged.

Management of the Company

The following tasks are performed in the management of the Property Investment Company and of the property.

Property Syndication

Property ownership is regarded by many as being an essential element of any investment package. Property more often then not is a growth asset and, whilst its market is cyclical, it moves independently of the shares listed on The JSE Securities Exchange South Africa.

Direct investment in retail, commercial and industrial property used to be the preserve of large institutions, corporations and wealthy individuals. Smaller investors were excluded by limited capital and insufficient time and expertise to manage the investment. The chance to invest directly in property, through acquiring units in property-owning investment vehicles, has been developed in an alternative investment concept, namely Property Investment Company.

What is Property Investment?

Property Investment comprises the assembly of a group of investors who pool their funds to invest in a Company whose sole asset is a commercial, retail or industrial property. The investment is made through buying units in this Company.

Through proportionate share of income together with such future capital growth as may be reflected by the increased value of the units held by the investor, he will share in the profits and losses of that property and enjoy the benefits of net rental growth.

Investors receive income on their investments regularly in arrears from the net rentals paid by tenants occupying the property. Net rental growth is dependent upon rises in gross rentals, offset by any ancillary increases in the costs of operating the property.

Investors also share in the costs, which could also rise, of owning that property. These may include rates and taxes, commissions payable to leasing brokers, tenant installation costs on reletting, maintenance and the administration fee for managing the property for the investors.

Capital growth is achieved by the increase in unit value and is realised on the sale of the investment. As with any property investment, the real benefits are gained over time and Property Investment are long-term investments. They perform best over a minimum period of five to seven years.

Advantages of Property Investment

Property Investment gives the investor an opportunity to acquire a unit in valuable commercial property, through the purchase of a unit in the Property Investment Company, thereby giving access to the financial advantages of a sizable and profitable investment.

In addition to this, the following advantages can be highlighted:

Inflation Protection
Property Investment tend to be sound medium- to long-term investments, offering returns comfortably in excess of inflation.

Tax
Investing in shares and loan units has the advantage that for an investor below the age of 65,
R11 000 will be tax free.

Low Risk
With the right property and the right management, Property Investment units offer a low-risk investment.

Stable Income Growth
They offer an income that escalates annually as rentals escalate according to the lease.