Burstone Group, formerly Investec Property Fund, which finalised the internalisation of its business in July, will focus on maintaining the stability of its existing portfolio.
CEO Andrew Wooler said the SA and Europe portfolio vacancies remained low at 3.7% and 0.9%, respectively, with like-for-like net property income growth of 2% and 7.9%, respectively, for the six months ended September 30.
In SA, 90% of space expiring has been re-let or leases have been extended, while in Europe the ratio was 96%.
“The two portfolios posted strong results, and as a business, we have delivered on what we said we would do,” Wooler told Business Day.
Enhancing tenant experience and retention remains a priority for the group, he said. In SA, Burstone will look to reduce the cost of occupation for its tenants, introduce green leases to share solar benefits with its tenants and invest into off-site security monitoring to enhance effectiveness and benefit from lower costs.
In Europe, the group will look to reduce occupation costs and invest €1m into LED over the next three years to enhance the sustainability of its portfolio.
Additionally, the focus will be on reducing its loan-to-value, which rose from 42% in March to 43%. The group is targeting reducing this to 41% in the short term, and 35% in the next three to five years.
Wooler said asset recycling in SA will continue, with about R800m worth of assets to be sold in the next 12 months. During the reporting period, 11 assets were sold for R1.2bn at a 2% discount to book value. Over the past three years, the group sold another R1.5bn in assets. In Europe, a pipeline of potential assets to be sold has been identified.
Burstone is an international real estate business, with R37bn in assets on its balance sheet and R5.4bn of third party capital management. About 55% of its asset base comprises foreign investments, which include an 83% interest in a pan-European logistics portfolio. It also entered the Australian market through an 18.7% investment in the Templewater Australia Property Fund and a 50/50 joint venture with Irongate Australia Fund Management.
Wooler said the internalised business creates an opportunity for Burstone to expand its fund management strategies across all regions. The group will introduce capital-light fund management-type opportunities giving access to different capital pools with the potential to use some of its portfolio to seed new strategies acting as fundraising tools, which will result in loan-to-value reduction.
In the short term, the group will look to enhance the quality of its earnings and effectively manage capital allocation.
Wooler said the group aims to evolve its investment strategy over the next three to five years. “We intend increasing our offshore exposure as capital markets are deeper, enabling us to grow.”
This would result in offshore accounting for 70% of its portfolio, with the balance in SA, which accounts for 48% of assets under management.
The company plans to increase third-party capital management to 25% of the portfolio, with Burstone-owned assets reducing from about 95% to 75%. “We will look to leverage our skill set to manage third-party capital and introduce new sources of capital.”
The group will also look at investing in impact sectors such as residential and senior living, reducing its office portfolio but increasing investments in retail and logistics and industrial.
“We believe that our integrated international offering will be a key differentiator as we implement our strategic plan over the next few years,” Wooler said.
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