Pension Fund invests on Praslin |04 November 2005

One 350 square-metre commercial centre at Baie Ste. Anne is being purchased from the current owner, while a second project will see a 5,749 square-metre commercial and residential centre built at Grand Anse.

Radley Weber, chairman of the Investment Committee of the Pension Fund's Board of Trustees announced the Praslin development on Thursday at the Fund's Caravelle House headquarters.

Mr Weber said that the Grand Anse development, which will be built near the district's petrol station and consist of offices, shops and executive apartments, will be constructed by the Laxmanbhai Company.

A tender for the project attracted six bids and although Laxmanbhai's tender price of R26.6 million was undercut by nearly R1.5 million by the lowest bidder, Sahajanand Builders, Mr Webber said that Laxmanbhai still emerged as the Fund's first choice.

"It is a relatively big project, the lowest bidder had never done a project of that size, and secondly, because the project is on Praslin, there is the whole logistics issue," said Mr Weber.

He added that the Fund had also considered the bidders' experience, quality of workmanship, ability to finish the project in the time frame given and the question of foreign exchange payment.

"We felt we needed to have assurances that the building would be completed, but also there was this question of foreign exchange and that for us was also very important.

"We came to the conclusion that Laxmanbhai could actually meet these criteria," he said.

While the tender had called for the project to be completed in 18 months the Laxmanbhai bid stated that it would finish the job in only 15 months.

Mr Weber said that the three months early opening would allow the Fund to draw an additional R500,000 from the project, helping to offset the extra R1.5 million spent on the Laxmanbhai bid.

Explaining the Pension Fund's move away from bank deposits and treasury bonds into commercial and property ventures Mr Weber said that new investments can generate a higher return.

"The money is not ours, it is members of the pension fund who have contributed, we have to make sure we get a return which is acceptable."

The new property will cost roughly R4,500 per square metre to build, significantly less than the Pension Fund paid for its premises at Caravelle House.

However Mr Weber said that other factors, aside form cost, need to be considered.
"When you buy a building it is not just the building costs," he said listing the location of the building and the revenue it generates as important factors.

The new development will be built on government land leased to the Pension Fund.

The second Praslin property is being purchased for R2.5 million from Simon Bistoquet.
The three-year old building, measuring 350 square metres over two floors, is near the main road in the Baie Ste. Anne area.

Already home to a number of offices and apartments, Mr Weber said that the property is generating a "good income" likely to produce a 10 to 12 percent return on the Fund's investment.

"We felt it was a safe investment to get into," he said.

Mr Weber said that the Investment Committee has no immediate plans for other commercial projects, "but I'm sure it will be coming up."

Commercial property developments by the Fund currently account for around 12 percent of its total investments.