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Property and Capital Markets Report

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Updated: Jun 21st, 2021

Introduction

Abacus Funds Management Limited

Abacus Funds Management Limited Company was formed in 1996 as a subsidiary of Godfrey Pembroke Limited (Australian security exchange, 2010, p. 4). Its main objective was to ensure that high value clients are well sourced and packaged for good property based investment opportunities (Australian security exchange, 2010, p. 7). In 1999, the company broke away from the parent company. Over time, it increased its distribution and financial planning network.

Abacus Property Group was derived from the merger of its trust with a small development company in 2001 (Abacus Property Group, 2010, p. 3). In 2002, it funded$54 million property acquisitions to expanding its existing mortgage portfolio. This facilitated its successful participation in various property transactions.

Progressively, the firm was also able to form an integrated property investment group. These changes enabled the firm to have an internal management structure that thus advancing its activities.

For example, the company was able to diversify its business activities to increase its market presence. In 2002, Abacus achieved the Australian stock exchange market status, and by 2007 it was included in the S&P/ASX 300 Index with a total net worth above $ 1.8 billion (Australian stock exchange, 2010, Para.1-3). By February 2010, the firm’s assets were projected to be $ 2.3 billion (Abacus Property Group, 2010, p. 8).

In its operation, the Group involved two main companies; Abacus Group Projects Limited and Abacus Group Holdings Limited, coupled with two trusts it holds. These trusts, which are managed according to the corporation act, allow investors to acquire securities which are stapled into units. Thus, Abacus Funds management holds a license as a real estate agent. They have an internalized system of management which upholds the stakeholders’ expectations

Assets Locality

The corporation has diversified its assortment in, business, and industrial assets from whence it derives most of its earnings from their rental income.

This is its major contributor to the company’s earnings (Abacus Property Group, 2010, p. 9). Abacus believes in an asset centric business model. Contextually, their priority is on the characteristics of the asset and the opportunities it presents, but not on the quantity of their assets.

In regard to its operation the corporation has focused on elementary property value by accurate asset selection procedure. As at the end of 2009, the company’s property worth was $ 799 million (Abacus Property Group, 2010, p. 13).

The firm has properties in various locations including; Lennon’s Plaza, Brisbane ($ 9.4 million), Westpac House, Adelaide ($ 55 million), Virginia Park, Bentleigh East (47.6 million), 51 Allara Street, Canberra ($49.9 million) among others (Abacus Property Group, 2010, p. 5). These properties are located in different states that the company has identified. Through this, it has been able to attain geographical diversity as depicted in the table and pie chart below.

Table 1.0

State %
NSW 46%
QLD 20%
WA 1%
VIC 16%
SA 8%
ACT 9%

From this illustration, it is evident that most of the properties are located in NSW state. The company has fewer properties in WA State. The company also has properties in other states. However, these are of varying percentages. The pie chart above shows the geographical distribution of Abacus properties in Australia. This is the company’s principal investment portfolio which explains why the firm has decided to diversify in a bid to have a wider market presence that will ensure that it achieve higher returns on its investments.

Types of Properties

The company has decided to be involved mostly in properties management in different states to boost income and capital growth. Assets estimates according to the Abacus Property Group (2010, p. 14) management, is above $2.2 billion. Approximately $1.7 billion of the total amount is accounted for by the 126 property investments the firm has in these states. On the other hand, the company holds some properties in joint ventures that allow it to be conspicuous in areas that it would otherwise not have been able to invest in.

Abacus seeks to invest in properties that will give value to shareholders. These properties should be able to provide a sound recurring rental income that will not be compromised under any circumstance. The firm’s management team has endeavored to be actively involved in active management to attain high returns from its properties (Abacus Property Group, 2010, p. 5), thus enabling them to keep track of their properties and ensure their viability as per the projections.

Its property assets are classified as plant, equipment and property. In cases where it holds properties in joint ventures, they are accounted for using the equity method. From the analysis, all the sectors that the company has diversified into are very viable. The company’s properties have an occupancy rate of 96%. This means that almost all of them are occupied.

The table and pie chart below illustrates the various types of properties that the company has in different sectors of the economy. By doing this, this has minimized its overreliance on one specific sector.

Table 2.0

Type/ %
Industrial and other 26%
Commercial 40%
Retail 34%

From the table and the pie chart, it is evident that the company has mostly invested in commercial properties. Most of the properties are within the commercials sector followed by the retail sector and then the industrial and others. This shows how the company has diversified by building various types of properties according to market demand.

Trust and debt levels

Abacus has four integrated businesses. Its investment property portfolio estimates is $ 621 million (Abacus Property Group, 2010, p. 4). In 2010, the company registered a profit of $ 65 million, with its recurring earnings increasing by 9%. The company’s recent financing has enabled the company to expand its balance sheet leading to increased of its total liquidity. The company has a high investment portfolio which has improved its trusts.

Its direct property investments are currently estimated to be over $ 849 million (Abacus Property Group, 2010, p. 11) which translates portfolio cap rate of 8.53%. The company’s investment portfolio has enabled the firm to improve its revenues. For example, in 2010, the company has managed to attain a return of $ 85 million (Abacus Property Group, 2010, p. 15). To build on these, the company continues to re-weight its existing portfolio to larger and higher quality assets.

This is done through the realization of smaller assets which, its new property ventures division has a combined investment of $ 288 million (Abacus Property Group, 2010, p. 16). The company has an asset under management of $ 840 million. In addition, it has not trailed in joint ventures and developments as is evident by its $ 136 million investment in 15 diverse joint venture projects (Abacus Property Group, 2010, p. 17).

On the other hand, Abacus has deployed $ 59 million across a number of co-investments (Abacus Property Group, 2010, p. 19). These joint ventures have been able to generate $ 4 million. Its property finance assets average $ 88 million. The firm has a loan book consisting of 5 exposures that total to $ 87.6 million (Abacus Property Group, 2010, p. 21).

Due to the current financial environment, the company has taken this advantage to restructure its loans. This has been done with an aim of ensuring that it increases its participation in project work. The company has been able to repay over $ 266 million of its debt (Abacus Property Group, 2010, p. 22). In addition, there is a plan to further finish a refinance program for its new debt facilities of $ 536 million.

The firm has a syndicated bank debt facility of $ 400 million (Abacus Property Group, 2010, p. 23). Contrary, the company has reapplied for $80 million bank loan as working capital. This allows it to borrow additional funds on its own assets. From the company’s financial results of 2010, it was able to generate operating cash flows of $ 64.6 million.

Location of the head office

Abacus is a specialist property investor with a diversified portfolio. Its head office is located in Sydney. The company’s registered office is located in Sydney, NWS.

Reference List

. 2010. Property portfolio. Web.

Australian Security Exchange. 2010. Listed investment companies & trusts. Web.

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