Property fund wants to grow its portfolio significantly
Property fund aims for balanced portfolio
LISTED property fund Texton has ambitions to significantly grow its property portfolio and has left its stated strategy to have 50 percent exposure to the UK market unchanged despite the vote for Brexit.
Nic Morris, the newly appointed chief executive of Texton, said yesterday that the value of the UK portfolio was closer to the 50/50 split when the rand was at R20 to the sterling but it was not racing to get to an equal percentage split between the UK and South African portfolios.
However, Morris said it saw a huge acquisition pipeline in South Africa and in the UK. The fund could move in the direction of the 50/50percent asset split in the medium term.
Morris added the intention was for a fair mix of assets between South Africa and the UK with the aim of obtaining strong distribution and capital growth. “The UK brings us a few assets and certainty of income and longer-term Brexit-proof leases while South Africa brings us higher growth, with typically 8 percent escalations on leases.
“We will manage the expansion accordingly to deliver the required return,” he said.
Morris said it did not have plans to diversify Texton’s portfolio further geographically. “Apart from South Africa, there are no plans to go into Africa. Why we went into the UK is that we had on the ground a presence in terms of an office and strong relationships.
“There are increasingly attractive deals outside of the UK but we have not (decided) to move out of the UK,” he said.
Morris said Texton’s local property portfolio was valued at R3.5 billion and its UK portfolio at R2.4bn.
He said it had a two-pronged strategy and looked for good assets and acquisitions that were yield accretive and improved the quality of the portfolio while trying to dispose of a few small non-core assets and reduce the weighting of offices, and the exposure to government tenants, in the South African portfolio.
Morris said government tenanted offices comprised about 15 percent of the portfolio and it had reduced it but planned to reduce it further. “We can reduce the weighting of government offices by increasing the weighting of retail and industrial. We have good buildings with great government tenants and have experienced one or two delays in the past with rental collections but collections are not a concern,” he said.
Morris was appointed chief executive of Texton effective from the beginning of this month and will be based in Johannesburg.
He was appointed managing director of Texton from September 1 this year as a part of a structured succession plan to replace the acting chief executive, Angelique de Rauville, who resigned as the acting chief executive and as an executive director from the beginning of this month.
Texton chairman Dempsey Naidoo said De Rauville had made a significant contribution in progressing the company’s strategy to achieve geographic diversification beyond South Africa’s borders.
Texton shares fell 0.38 percent yesterday to R7.90.