Public Property Asset Management

Models

22 August 2007

N. Mandindi

Intersite started as a property division of the SA Rail

Commuter Corporation Limited in 1991; and, in 1992

established as a separate corporate entity to manage and develop the property portfolio of

the SARCC.

Background

MINISTER OF PUBLIC ENTERPRISES

TRANSNET

SAA

SPOORNET

PETRONET

AUTONET

PORTNET

PROPNET

MINISTER OF TRANSPORT

SARCC

INTERSITE

METRORAIL

Institutional Arrangement

CONTRACTUAL AGREEMENT WITH METRORAIL TO OPERATE THE COMMUTER RAIL SERVICE

The critical success factor of Public Property is its ability to

support service delivery through the provision of “fit for

purpose” facilities

PUBLIC PROPERTY PURPOSE

PRINCIPLES TO DEAL WITH

1) OWNERSHIP

2) MANAGEMENT

FUNDAMENTAL DECISIONS

Establishment of Property Agencies (SPV)

Government holds 100% equity

Assets transferred to entities

Asset controlled by financial instruments

Government provide policies & guidelines

Creation of value a requirement

Return expected

STATE PROPERTY OWNERSHIP

Owner/Manager separation – international trend

Ownership/Management duties transferred to and vest in specialists

Government representation – Agency Boards

Reporting requirements – Annual Statements

Specific Performance Parameters

Structuring of entities – Private Sector principals

STATE PROPERTY MANAGEMENT

• Finland

• Norway

• Sweden

• Queensland - Australia

International Models

Finland ModelState Real Estate StrategyDecision on Real Estate Strategy in 1998

Objectives : Efficiency, yield on capital, reduction on facilities costs, increase on property value

Real Estate divided into two groups A) Core, B) non core

Group A transferred to Senate Properties

Group B transferred to Kapiteeli OY

GOVERNMENT OF FINLAND

TRANSFER OFPROPERTIES (NON TITLE)

8.1m sqm (11300 buildings)

AGENCYSENATE PROPERTIES

Defence Premises

1074 000 sqm

TurnoverR687.6m

Net Income6.6%

Special Premises

1312 000 sqm

TurnoverR1.2billion

Net Income7.5%

Office Premises

1289 000 sqm

TurnoverR1.3billion

Net income7%

Development Premises

Development and Selling of vacant

land

PORTFOLIO ANALYSIS of AGENCY (5 DIVISIONS)

100% EQUITY IN AGENCY

FINNISH MODEL

Universities18 in total

1794 000 sqm

TurnoverR1.7billion

Net income7.4%

Book valueR49.5billion

Kapiteeli OY

Real Estate Investment Company

Property Value 1,2 bn Eu

Portfolio : Business premises, hotels

Senate PropertiesCorporatised Entity owned by Ministry of Finance

Property transfers from Department of Education, Justice & Defence

State Budget Reform

Increased attention to Capital Costs

User of Properties responsible for costs (space & facilities)

Concentrated & effective management of property

Economies of scale resulting in cost reduction

Real Estate Investment increase

Senate Properties Portfolio University Premises

Office Premises

Special Premises

Defence Premises

Developments

Norway

1960 - Directorate of Public Construction and Property was established

1992 - Reorganisation of the directorate – introduction of rent (lease) payment

2000 – Commercial property was separated from Statsbygg

The remaining properties of Statsbygg consists of ”purpose” buildings (infrastucture)

GOVERNMENT OF NORWAY

TRANSFER OFPROPERTIES (Titles)

2.1m sqm

AGENCYSTATSBYGG/ENTRA

Commercial

ENTRA EIENDOM

952 000sqm

Book ValueR16billion

Non-Commercial

STATSBYGG

2.1m sqm

Book ValueR21billion

PORTFOLIO ANALYSIS OF AGENCY

100% EQUITY IN AGENCY

NORWEGIAN MODEL

Regional Colleges 800 000 sqmAdministration buildings 660 000Special Schools 100 000Road Stations 75 000Museums & History blds 54 000Research Buildings 120 000Embassies 94 000Others 197 000

Book ValueR37billion

PoliceColleges/Universities

MunicipalitiesRevenue offices

CustomsRevenueRoads

Courts of JusticeNorwegian Petroleum

Post

Norway - Statsbygg

Statsbygg is an administrative body, responsible to the Ministry of Modernisation

Building projects are financed by reinvestment of rent income or by government subsidy

Property management and maintenance is financed by rent income.

Norway - Statsbygg

Statsbygg acts on behalf of the government as consultant and manager in construction and property affairs.

Statsbygg construct buildings for own administration, but also universities, prisons and other ”not-rented” buildings

Statsbygg offers governmental organisations advice suited to their needs, in either new or existing buildings.

Norway – StatsbyggPolitical directions in the budget

In the Chapter for Statsbygg

Political objectives in the areas of architecture, the environment, cultural heritage and universal design

Initiate and participate in R&D projects inter alia by using its own building projects as pilot projects to assist in gradually introducing and using digital building models in the construction and property industry throughout a building’s entire lifecycle

Norway - StatsbyggCategory Square

meter%

Regional colleges 800 000 38 %

Adm. buildings 660 000 31%Spec. schools (child welf.) 100 000 5%

Road stations 75 000 4%

Mus./Hist. build. 54 000 3%

Research build. 120 000 6%

Embassies 94 000 4%

Others (unspecified) 197 000 9%Total 2,100,000 100

Norway - Entra Established July 1st, 2000

Wholly-owned by the Norwegian Government

The property portfolio is, per Q2 2006, approximately 52.000 m², of which approximately 20% are development projects The focus segment is office 120 properties concentrated in the 7 biggest cities in Norway Approximately 70% of the portfolio is in the Oslo-

area Market value is approximately 15 NOK billion

(€ 1,87 billion) (December 2005)

Annual rental income is approximately 1 NOK billion(€ 125 million)

Approximately 120 employees, of which 70% are operational staff who manage the properties

Norway - Entra MARKET POSITION

0

200

400

600

800

1 000

1 200

1 400

1 600

Vital

Entra KLP

Eiendomsspar/ Vict

oria

OTE ASA

Norwegian Pro

perty AS

Nordea

A. Ramm

Oslo Areal

0

2

4

6

8

10

12

Years

Sq. metersWeighted remaining contract duration

m² (1000)

Norway Entra Portfolio

• To maximise the long term recurring income and investment on the portfolio.

Letting, number of square meters0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000

Post

Norwegian Petroleum Directorate

Courts of J ustice

Public Roads Administration

National Insurance/Tax Assessment

Customs

Dir. of Taxes/County Revenue Office

County Municipality

Colleges / Universities

Police

Sweden• Fragmentation and specialised

focus

• State property Transferred to Enties :

• Akademiska Hus - Universities

• Vassakronen - Defence

• Jernhusen – Rail properties

• SFV – National Property Board – Forests, Forts & Foreign Affairs

GOVERNMENT OF SWEDEN

TRANSFER OFPROPERTIES ( Titles)

2.15m sqm 1800 buildings

AGENCYNATIONAL PROP

BOARD (SFV)

Profitable Properties

Non Profitable Properties

PORTFOLIO ANALYSIS OF AGENCY

100% EQUITY IN AGENCY

SWEDISH MODEL

Book valueR10.5billion

1800 own buildings320 State owned buildingsFree Land (6.5m hectares)Castles and Royal Estates

TheatresMuseums Embassies

Forest and landState owned historical buildings

National Property BoardSFV owns 1,800 properties in Sweden, totalling 2 million m².

SFV manages 6.5 million hectares (around 16 million acres) of land – one seventh of Sweden’s surface area.

SFV administers state-owned property and land at 73 locations in 69 countries around the world. In 44 of these countries we manage a Swedish Embassy.

SFV manages four items on the UNESCO list: Drottningholm Palace and parts of the Naval Port of Karlskrona; the agricultural landscape in southern Öland; and World Heritage Laponia.

Queensland - AustraliaWhole of Government approachWhole of Government approach

Q BuildQ Build

Q FleetQ Fleet

User Pay modelUser Pay model

Strong emphasis on efficiency and Strong emphasis on efficiency and high level of maintenance and high level of maintenance and facilities management facilities management

Queensland - Australia

Property Agency - RationaleEfficiencies

Accountability

Focus on delivery

Business/private sector principles

Introduction of User Pay principleMarket related or

Controlled system

BENCHMARKING

The Nordic Countries vs South Africa

Property Agency ConceptImplemented more than a decade ago in Norway, Sweden, Finland

Public Works model with overarching mandate over state property

Capacity building thro institutions of higher learningDesign philosophyRole of Public works within GovernmentUser pay system ??Budgeting for Capital works implementationsProperty AgenciesProvincial pilotingDevelop a critique – Relevance to South Africa – analysis of SA public property including capacity building mechanisms

QUESTIONS

THANK YOU