JOHANNESBURG – Texton Property Fund will bet the fund’s future growth on “tight management”, as the property counter announced a distribution growth of 85, 47 cents up by 10.6% for the year ended June 30.
Investors from Texton Property Investments bought the management company of Vunani Property Fund for R117 million last year and a subsequent board reshuffle which followed, which Texton says the benefits of this shakeup have been evident.
The benefits of the reported for the financial year includes the fund increasing its acquisition activity by 40% compared with the previous year, which has “enhanced the portfolio quality and the sustainability of its income.”
This includes four properties collectively valued at R598 million and another R379 million worth of assets in the process of being transferred into the fund. Some of the acquisitions includes St George’s Mall in Cape Town, Edcon building in Johannesburg and Quintiles in Bloemfontein.
Texton, which has a significant exposure to the office sector compared with the 51-odd JSE listed property counters has seen vacancies in its property portfolio improve to 5.3%, from 5.6%.
Texton acknowledges that the last 12 months has been tough in the market, especially the office sector which pressure has been building up with high vacancies, lackluster growth in rentals and concentrated growth nodes.
“The office market is struggling. We have a 94% office exposure and we have seen an oversupply in development activity in Johannesburg and Cape Town… We have always done well, I don’t mind the office sector, it’s not scary for us,” Texton CEO Rob Kane told Moneyweb.
“Next year will be a relatively quiet year for leasing activity, with 12.2% of leases due to expire. Negotiations are far advanced on 5% of the expiries and we are confident we will retain our tenants without rent reversions,” the fund notes in a Sens release on Monday.
The fund which has office properties including Greenstone Hill Office Park in the East Rand, Athol Ridge in Sandton, Cape Town’s Foretrust Building and Standard Bank Private Bank in Hyde Park is seeking to diversify its assets.
The fund is on the lookout for opportunities in the industrial and retail sector. Kane clarifies that Texton will not buy an asset if the fund will not manage it; but he is cautious about the retail sector in the wake of slowing consumer [spending]. The fund also has its eyes set on offshore opportunities.
“We are looking across the board (in terms of markets). We have been chatting about it at board level and we want to do it right.The board will not move offshore unless it is fully confident that we have the necessary skills and deep market knowledge.”
Stanlib head of listed property funds Keillen Ndlovu says it is not clear where the offshore destination for Texton will be, but it would likely be the UK.
“It seems like there will be a lot of activity over the next year to two. This does not surprise given the change in strategy, management and shareholding,” Ndlovu explains.
To deliver the offshore investment will be dependent on expertise, through its restructured board which comprises Angelique de Rauville, her father Gerard de Rauville, Thys van Heerden and Chick Legh.
“This is a new beginning for Texton… Management is yet to be tested in this reborn entity but the positive thing is that they bring with them a lot of property experience in their individual capacity,” says Ndlovu.
Senior portfolio manager at Old Mutual Investment Evan Robins says the fund’s results were good, especially for a fund that specialises in the office sector.
“They have achieved double digit distribution growth, the top end of their guidance and an outlook of top quartile distribution growth next year and they are managing fine despite the tough office sector,” Robins told Moneyweb.
He adds: “Management is key in actively adding value to buildings and their portfolio around. Locally, management has a good track record; it’s a very good fund and managements are experts.”
The double digit growth reported by Texton – compared with some of its property counterparts reporting distribution figures in the region of 7% to 8% – could have been enhanced by the funds acquisition drive, Robins explains. The listed property sector is expected to record returns of less than 10%.