Financial Mail - Investors Monthly
Tapping potential
A people-centred approach is key to success in the real estate sector
Despite SA’s downgrades creating a difficult investment environment, diversified real estate investment company Redefine Properties believes it is well positioned to weather the downturn.
One of SA’s largest real estate companies by market capitalisation (about R60bn), Redefine is committed to its local investments, despite political uncertainty. In late 2016 it bought property development company Pivotal for R11.8bn to improve the quality of its local portfolio.
Over the past six years the group has also grown its international footprint with a presence in the UK, Germany, Australia and Poland.
CEO Andrew Konig says the company regularly reassess its strategy to align with long-term trends. In its financing strategy, it recycles capital and reinvests in other, higher-potential investments.
Similarly, its global exposure is continually reviewed. “As far as our international strategy is concerned . . . we look for opportunities where there is scale and, importantly, partners on the ground with aligned interests,” he says.
The group’s brand promise is aimed at its tenants, brokers, investors, communities in which it operates and employees. What Redefine strives to do, says Konig, is create sustained value for stakeholders.
“Bricks and mortar are a generic product, albeit that the position and functionality of that product is important. However, it’s the people who occupy the bricks and mortar that carry the greatest import.
“[As] rental prices need to be market related, they are not a competitive edge. Rather, it’s the complete offering with people at the heart of it that provides the competitive edge.” Standing out Konig says five pillars differentiate Redefine’s offering.
The first is a sectoral and geographically diverse property portfolio in three key sectors: office, retail and industrial. “Our strategy is to target quality earnings to underpin sustained growth and to focus on real estate and related investment rather than a particular sector,” says Konig.
Redefine will be affected by further credit rating downgrades as uncertainty puts pressure on the cost of investment capital. Achieving sustainable growth in this environment requires an agile and flexible approach, the second differentiating pillar. This includes a flat management structure, which allows for quick, efficient and decisive decision making. It means the group can respond to tenant needs swiftly and take advantage of any opportunities that present themselves. “We seek out and deliver on opportunities that will create value well into the future,” says Konig.
The creation of sustained value, the third pillar, requires a risk-resistant rather than riskaverse, approach. Operating in a long-term asset class requires a carefully considered approach to risk, says Konig, adding that a balance is needed between defensive assets and those that can be improved.
Extraordinary talent, the fourth pillar, sets Redefine apart from its competitors. Retaining top talent is a challenge, says Konig, as is attracting young people to the property industry. The company addresses the first challenge through a longterm retention rewards programme and ongoing interventions to ensure staff engage with the company’s values; a learnership programme addresses the second.
Learnerships, Konig says, constitute about 10% of the company’s employment pool. “We offer attractive career opportunities as a result of the fact that we are constantly growing through acquisitions.”
The final differentiating pillar is a people-centred approach. “We’re cognisant of the fact that properties don’t produce income — they’re merely our commodity,” says Konig. “It is people who produce income. Though factors such as location, demographics, functionality and aesthetics can enhance or diminish income potential, the single greatest influence on real estate value is the people who develop and manage those properties.”
Konig believes this people-centred approach is essential if the company is to remain relevant, particularly in the retail space, which will be affected by the recessionary environment. “We do what we can to support tenants to retain a share of a shrinking pie. It’s about weathering the storm together and ensuring that each tenant’s space is optimised.”
Konig believes an uncompromising focus on the environment, social responsibility and governance is essential, as is ethical leadership. “The emphasis on living Redefine’s values consistently to uphold our brand promise to all our stakeholders is not negotiable.”