Texton now on sounder footing under CEO Morris
Texton Property Fund, the diversified real estate group which has struggled over the past couple of years, has been placed on a better footing by CEO Nic Morris.
In the past six months to a year, Morris and his team have managed to internalise the fund’s external management company, sell many of the smaller tail assets which did not suit the fund’s investment profile, and have established a presence in the UK.
Many market commentators have been critical of listed property groups having external management companies.
This was because the external management company earned fees for every property deal done. This could create a conflict of interest as external managers may be motivated to grow the fund regardless of the quality of potential acquisitions.
This prompted Morris and Texton to internalise the management of the group.
Texton listed on JSE in 2011 with a total portfolio value of R943m. It now has a portfolio valued at R5.63bn. Of this, R3.3bn is in SA and R2.2bn is in the UK. Its vacancies were 3.9% at the end of March.
“We have worked hard to position Texton well to deal with the current macroeconomic environment and have focused on reducing vacancies overall as well as reducing our loan-tovalue (LTV),” said Morris. At the end of March, the group’s LTV was 37%.
Morris said the group would look to sell more of its smaller noncore assets in the near future and then consider more acquisitions in SA and abroad.
Garreth Elston of Golden Section Capital said that Texton’s fortunes were improving but it still faced challenges.
“I believe that Texton is emerging from a few difficult years, and management has been working hard to reposition it to better deal with the issues in both SA and the UK. The company’s sales of noncore assets has been a positive move, but the company still has several hurdles in its path,” he said.
He said there were some concerns. One involved potential pressure on the LTV.
“We anticipate that the company’s cost of debt in SA will rise, as it has only fixed 49% of its SA debt,” said Elston.