Marius Muller, the fifth CEO to lead Texton Property Fund since its formation in 2014, says the group needs its board to give it capital to bring an end to its struggles, which have seen its share price more than halve and its dividends plummet.
Muller said he had spent 100 days in his new role trying to adapt Texton’s strategy and improve its operational metrics, but for the real estate investment trust (Reit) to succeed over the long term it needs help.
“Right now our focus is on getting our vacancies and debt levels down and selling our tail assets, which are worth about R121.6m. This will place Texton into a healthier position for the short term but we need a bigger intervention to get to the next level. This would include the board taking action and raising capital,” he said.
Texton could then invest more in the UK where there may be acquisition opportunities, while uncertainty around the Brexit process weighs on the values of commercial property, he said.
Texton, which owns a range of assets in SA and the UK, saw its dividend fall 24.6% in the six months to December 2018 compared with the same period in 2017. This was its worst dividend performance since it was spun out of Vunani Property Investment Fund at the end of 2013. The total vacancy at its SA portfolio rose from 9.3% to 12.6% between the end of June and the end of December 2018. Its UK vacancy was 3.7%. Its total vacancy was 10.5% at the end of year.
Factors that contributed to its decreased dividend included lower net property income because of the slower-than-budgeted take-up of vacant space; increased net finance costs; and fewer foreign exchange gains. Its tax liability rose because of a change in tax regulations in the UK.
Texton’s total property assets are valued at R5.2bn, of which 61.8% by value is in SA and 38.2% is in the UK. In SA, Muller said the company will continue to invest in properties in metropolitan nodes. In the UK, Texton’s investment strategy is to target high-yielding, single-tenant properties in strong secondary nodes.
Management wants to decrease Texton’s debt levels. Its loan-to-value ratio fell from 42.7% to 40.3% during the half-year. The goal was to bring this below a long-term threshold of 40%, towards 35% in the next six months.
A number of fund managers have said Texton is a takeover target for the likes of Rebosis Property Fund and Arrowhead Properties but if a fund bought it it would have to sell the UK assets if it did not want offshore exposure.
Bridge Fund Managers chief investment officer Ian Anderson said Texton’s management needs to provide a focused strategy.
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