A leaner, cleaner look

Former rand hedge stock Tradehold has reinvented itself as a major player in SA’S lucrative logistics sector

Tradehold has not yet featured prominently on the buy lists of diehard property investors, judging by the hefty 37% discount to NAV at which the counter is trading.

The company’s previously rather complicated structure and diverse interests, spanning various countries (the UK, Zambia, Mozambique, Botswana, Namibia and SA) and different sectors (financial services and real estate), no doubt fuelled perceptions that it is a mixed bag — not entirely a property nor a general equities stock.

However, the company has in recent months streamlined its operations to become a pure property play with a sizeable SA exposure, a move that is likely to place the counter more regularly on the radars of local real estate investors. Not only has it unbundled its financial services division from the property assets with last week’s separate Jse-listing of Mettle Investments, but Tradehold also plans to exit most of its African investments (Namibia being the only exception) and focus on SA instead.

That marks an important shift in strategy. When Tradehold initially listed on the JSE to house the foreign retail property assets of SA billionaire Christo Wiese, 100% of its earnings were generated outside SA.

Tradehold moved into the SA market in December 2016 through the acquisition of the Collins group, a fourth-generation familyowned developer that hails from Kwazulunatal. What makes the acquisition of the Collins portfolio and its management team particularly intriguing is the bias towards logistics properties (modern warehouse and distribution centres) — widely regarded as the best-performing subsector of the SA real estate sector.

The acquisition of the Collins portfolio, worth R9.4bn, in one fell swoop placed Tradehold among the JSE’S largest and most experienced industrial property players. Collins also owns a number of properties in Namibia, including the 27,000 m² Dunes Mall in Walvis Bay (in partnership with Atterbury) and a City Lodge in Windhoek. Known for its deal-making skills, the Collins family now owns just more than 32% of Tradehold and will help drive the company’s new strategic direction.

Tradehold joint CEOS, Sa-based Friedrich Esterhuyse and Uk-based Tim Vaughan, believe the company’s repositioning will create a better understanding of its business. It will also allow management to focus fully on two main regions — SA and the UK. “I think the market will appreciate the cleaner, more simplified structure.” says Esterhuyse.

Esterhuyse and Vaughan have made impressive strides to grow Tradehold’s assets. In the four years ending February, the company’s property portfolio increased more than 10-fold — from £72.5m (R1.18bn) to £842m (R13.7bn). At the annual results presentation last week Esterhuyse said Tradehold is now moving into a consolidation phase.

Management will continue to bed down the Collins portfolio and has identified smaller, noncore properties worth around R1bn for sale.

Esterhuyse says the decision to sell Tradehold’s eight retail and housing developments in Mozambique, Botswana and Zambia worth £74m was due to the complexity of managing a small number of properties spread over several countries.

The investment case for the rest of Africa has clearly also deteriorated on the back of continuing volatility in oil, commodity and currency pricing. “We did well in [the rest of] Africa but the development returns should be better considering the amount of risk and effort and the high cost of funding involved. We believe we can deploy our capital better in markets where we have easier access to capital and can create scale with a management team on the ground,” Esterhuyse says.

Part of the proceeds will be reinvested in the UK, where Tradehold plans to put £160m into refurbishing, repositioning and expanding its £250m UK property portfolio, owned through its subsidiary Moorgarth.

The latter consists of 27 properties, mostly retail and office buildings. The company recently also entered the short-term serviced-office space sector in central areas of London, such as Mayfair, Shoreditch and Covent Garden.

Tradehold’s flagship retail properties include Bolton Marketplace (39,000 m²) near Manchester, Broad Street Mall (42,500 m²) in Reading, west of London’s Heathrow airport — co-owned with Jse-listed Texton — and Waverley Mall (7,939 m²), a joint venture with SA’S Moolman Group next to the iconic Balmoral Hotel in Edinburgh.

Vaughan says Moorgarth is not looking to add new assets to its UK portfolio given the challenging trading conditions amid lingering uncertainty about how Brexit will play out. Instead, the company

We did well in [the rest of] Africa but the development returns should be better Friedrich Esterhuyse