SPECIAL FOCUS - Integr8 Group

“Besides adding strong
cash flows and an
underlying asset base,
property ownership
also supports and
strengthens our core
ICT operations within
the group.”
Integr8 Property, the only non-ICT company
in the Integr8 Group, is nevertheless in close
alignment with the group’s strategic focus on
long-term annuity income, while also adding
a significant asset base to its balance sheet in
the form of prime property investments. “It’s
not such a startling diversification as it may first
seem,” says Rob Sussman, joint Integr8 Group
managing director. “Besides adding strong cash
flows and an additional asset base, our growing
property portfolio also supports and strengthens
core ICT operations within the group.”
Sussman explains that Integr8 Group companies
themselves occupy some of the division’s larger
commercial properties in Waverly, Johannesburg,
Sea Point, Cape Town, and La Lucia Ridge, Durban.
“As long-term owner-tenants we invest considerably
in the buildings’ ICT, power generation and other
infrastructure, as any owner would,” he says.
“We take pride in our buildings featuring leadingedge
technology and brand professionalism.
Ownership further gives us much better control over
our own fate when we outgrow our premises.”
In the first five years of the Integr8 Group’s
existence, it moved practically once a year to
accommodate its runaway growth, he reveals.
“Now, should we become too big again, we can
simply scale upwards and outwards,” he laughs.
He adds that group companies occupying
Integr8 Property premises are, however,
treated as true tenants, as Integr8 Property
entities operate with total independence.
Separate and independent
This division notwithstanding, Integr8 Property
has some common shareholders with other group
businesses, which gives the group the platform from
which to exercise its rights of ownership. Currently
valued by registered appraisers in excess of R300
million, Integr8 Property’s holdings fall into two
broad classes – commercial (70 percent of holdings)
and residential (30 percent), and grouped as such
into two overarching entities. Within those entities,
six associated but independent companies manage
Integr8’s property-related operations.
“We don’t get involved in development
and building,” Sussman notes. “We purely
invest - in commercial properties for the
annuity yield, and in residential properties for
the capital appreciation.” While the annuity
rental income on residential property is easily
outclassed by other investment mechanisms,
the capital base is what attracts Integr8.
Even so, commercial properties attract significant
annuity income on top of their asset value, a
proposition that accounts for the company’s 70-30
split between commercial and residential holdings.
Purpose-suited
Sussman says properties under Integr8 Property’s
control are either owned outright by it or in
partnership with other organisations. “We always
take a substantial stake in a property we deem
suited to our needs, in any event never any less than
25 percent,” he notes.
As regards suitability, the group’s preference is
for prime, high-value properties, both commercial
and residential, in the right areas. On the coast this
means prime sea-facing properties; in Johannesburg
it means anything in and around Melrose Arch.
A poor property in a poor area is evidently not
attractive. Neither is a good property in a poor
location. “During a down-turn, such as we’re
experiencing now, you won’t get good annuity
income on such properties or in those areas. Hence,
we focus on AAA-grade properties; the best of the
best in the best locations,” says Sussman.
Having an asset base that yields long-term
revenue is in many ways a natural outcome of a
successful run of almost a decade in the Integr8
Group’s core business of ICT solutions integration.
It bolsters an already strong value proposition and
doesn’t deter from its strategic focus on recurring
revenue. And to top it all, it represents the crowning
glory of a mature, successful business. B
Integr8 IT - special focus
AUGUST 2008 - 19