Woolworths CEO in for an even tougher AGM

If Woolworths’ CEO Ian Moir thought last year s annual results presentation was the toughest he’s had to ’face, he’s bound to be in for a surprise. This year’s looks like it’s going to be a lot harder.

A year ago he had to explain why the group had to write off R7bn at its Australian subsidiary, David Jones, which it bought for R20bn in April 2014.

David Jones has never really performed for the group. It was hoped that Moir, who led the turnaround of its other Australian chain, Country Road, could work his magic at David Jones.

This didn’t happen. David Jones not only kept struggling, but its third CEO David Thomas suddenly resigned on Thursday.

Thomas’s departure was followed by the sudden resignation of two nonexecutives from the board. This year Moir will have to take questions on why David Jones is still underperforming, why Thomas and the board members suddenly resigned, and why its SA clothing operation is struggling.

Another question that could be posed to the board is whether it is comfortable with a CEO running Woolworths remotely from Australia?

Listed property companies that have struggled to manage escalating vacancies in SA’s slowing economy are finding new ways of filling space. Two of the JSE’s biggest property groups, Growthpoint Properties and Redefine Properties, have converted large offices into shared workspaces and then rented them out to tenants on multiyear leases.

These tenants then let space to small and medium businesses using flexible terms. This means a business might rent for a day, a month, six months or longer. The subtenants share amenities provided by the main tenant.

Redefine, Growthpoint and other established property funds tend to own more high-quality, well-located office buildings than small funds, which is what shared workspace operators find appealing.

These buildings tend to be in premium nodes such as Sandton and Rosebank in Gauteng but have had relatively high vacancies over the past few years because not enough large corporations have been willing to match the rentals charged. And not enough growing businesses can afford to rent in these nodes given weak economic conditions. Sandton’s office vacancy sits at close to 20% while Rosebank’s is close to 10%.

Redefine on Thursday announced it had let six floors of the newly built Rosebank Link tower to WeWork, one of the US’s largest operators in shared workspace services. This is the New York-based group’s first foray in SA. It already operates in 400 locations across 100 cities.

Rosebank Link has 15 storeys and a gross lettable area of about 18,000m² of office space, as well as 817m² of space for retail on its ground floor.

Meanwhile, Growthpoint owns half of Workshop 17 which has branded shared workspace offerings at places such as The V&A Waterfront, Cape Town’s CBD, Sandton, Rosebank and Paarl. CEO Norbert Sasse said this conversion strategy would work well for certain buildings which have enough amenities in place already and are in popular locations.

TWO OF THE JSE’S BIGGEST PROPERTY GROUPS HAVE CONVERTED LARGE OFFICES INTO SHARED WORKSPACES