Texton hits the bottom as CEOs turn the exit stiles
Texton Property Fund, which has had four CEOs in as many years, has released the worst set of financial results of any property company in the current reporting season.
The real estate investment trust, which struggled with increased vacancies at its office assets in SA as well as devaluations in its UK retail portfolio, reported that its dividend shrank 13.1% in the year to June.
The R180m cost of internalising its management company also weighed on its performance during the reporting period, results showed on Monday.
Texton was formed in 2014 after the takeover of SA-focused Vunani Property Investment Fund. It was then externally managed by Texton Property Investments which helped it invest in the UK. The idea was to grant investors diversification across the two regions.
Executives including Nosiphiwo Balfour, the latest CEO to resign, and Nic Morris before her, spent two years selling many of its underperforming SA assets. The strategy included achieving an even SA-UK split.
BRITISH RETAIL ASSETS HAVE LOST VALUE ACROSS THE BOARD SO WE ARE NOT UNIQUE THERE
At the end of June 2018, about 40.7% of its assets by value were in the UK and 59.3% in SA. Some critics have said they felt the external management company’s interests were not fully aligned with those of Texton’s shareholders, which is why the management was internalised earlier in 2017.
Evan Robins, listed property manager for Old Mutual Investment Group’s MacroSolutions said Texton had made progress in refining its portfolio before Balfour suddenly resigned last month, after being in charge since July 2017. The group reported on Monday that its total vacancies climbed 61% to 7.9%, its portfolio value fell 1.9% to R5.4bn and its net property income dropped 5.4% to R416.9m. Loan-to-asset value also weakened, climbing from 50.9% at the end of June 2017 to 55.4% at the end of the reporting period. Texton’s share price was 5.28% down at R5.20, at the close, rallying from 12% down in early trade.
Independent nonexecutive director John Macey said the company “had played a role in the group losing two CEOs in two years”.
CFO Inge Pick said: “We have taken numerous hits this year, but I expect our performance to improve next year. We are managing vacancies in SA. UK retail assets have lost value across the board so we are not unique there. We believe our hands-on management will see these assets perform better.”