Texton Property Fund are betting 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 up to June 30th.
Investors from Texton Property Investments purchased the management company of Vunani Property Fund for R117million last year, followed by a subsequent board reshuffle which Texton claims the benefits of this shakeup have been evident.
Benefits of the report for the financial year includes the fund increasing its acquisition activity by 40% in comparison to the previous year, which has been said to enhance the portfolio quality and income sustainability.
This includes four properties totalling a value of R598million plus a further R379million worth of assets currently in process of being transferred into the fund. Acquisitions include Edcon building in Johannesburg, Quintiles in Bloemfontein and St. George’s Mall in Cape Town.
Texton, which has a significant exposure to the office sector in comparison to the 51-odd JSE listed property counters, has seen an improvement in vacancies to 5.3%, from 5.6%.
Texton has taken into consideration that the recent year to date has been tough in the market, particularly upon the office sector which has experienced pressure with high vacancies, slower growth in rentals and focused growth nodes. This is as Texton has a 94% office exposure seeing a development oversupply in activity within Cape Town and Johannesburg.
The property fund claim next year will be a moderately quiet year for leasing activity, as 12.2% of leases are due to expire. Negotiations are far advanced on 5% of the expiries and there is confidence to retain tenants without rent reversions. This was announced on a Sens release on Monday.
The fund which has office properties such as Greenstone Hill Office Park in the East Rand, Cape Town’s Foretrust Building, Standard Bank Private Bank in Hyde Park and Athol Ridge in Sandton, are looking to diversify its assets.
Texton are looking towards opportunities within the retail and industrial sector. CEO of Texton, Rob Kane clarified that Texton are not to purchase an asset if the fund will not manage it; however, there is caution around the retail sector in the current slowing consumer spending. The fund are also speculating overseas opportunities. However, overseas opportunities will not be taken unless there is full confidence that the necessary skills and deep market knowledge have been acquired.
Keillen Ndlovu, the Stanlib head of listed property funds, claimed it is not clear where the overseas destination for Texton will be, but would likely be the UK.
It seems there will be much activity over the upcoming year to two years. This is unsurprising considering the change in strategy, management and shareholding, according to Ndlovu.
To deliver the overseas investment, expertise will be depended on, through its restructured board comprising Angelique de Rauville, her father Gerard de Rauville, Chick Legh and Thys van Heerden.
Ndlovu explains this is a new era for Texton. Management is yet to be tested, however there is much property experience in their individual capacity.
Evan Robins, the Senior portfolio manager at Old Mutual Investment claimed fund's results were good, particularly for a fund specialising in the office sector. A double digit distribution growth has been achieved, the top end of their guidance and an outlook of top quartile distribution growth next year are managing fine, regardless of the tough office sector.
Management is crucial in actively adding value to buildings and portfolios. Locally, management has a great track record; with a very good fund and expert managements.
Robin went onto explain that the double digit growth reported by Texton – in comparison to some of its property counterparts reporting 7 to 8% distribution figures - could have been enhanced by the funds acquisition drive. The listed property sector is forecasted to record returns of under 10%.
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