TEXTON Property Fund, the listed property company with a heavy office sector weighting, is planning to diversify to other property sectors and look at opportunities outside South Africa.
Rob Kane, the chief executive of Texton, which was previously named Vunani Property Investment Fund, said yesterday that the office sector was struggling “so some diversification of risk is prudent”.
Kane said Texton was looking at selected opportunities in the industrial and retail sectors that would enhance its offering to shareholders.
Almost 93 percent of Texton’s total portfolio by gross lettable area is in the office sector and only 4.3 percent in the retail sector and 2.8 percent in industrial property.
Kane said the past 12 months had been tough in the property market and nowhere more so than in the office sector.
The sector had an average vacancy rate of 11.3 percent but Texton’s vacancy rate improved to 5.3 percent in the year to June from 5.6 percent in the previous year. Kane added that the fund’s board was also applying itself to opportunities outside South Africa but would not move offshore unless it was fully confident it had the necessary skills and deep market knowledge.
“Fortunately, management has significant experience in markets outside of South Africa and this knowledge will deliver improved dividends and risk diversification,” he said.
The fund is also taking action to improve its empowerment credentials. Kane said it scored very highly in all aspects of its operations in terms of broad-based black economic empowerment (BEE) except equity ownership and a sub-committee was appointed by the board to consider and propose both a suitable broad-based BEE structure and participants.
He added that the imminent transfer of the PD Naidoo portfolio would result in 6.2 percent of Texton’s shares being owned by black-empowered individuals and entities and would ensure the fund achieved at least a Level 3 rating.
Kane said about 11.1 million shares would be issued for the settlement of the Scott Street property in Waverley in Johannesburg, which was acquired after the reporting period to end-June, while an additional 20 percent BEE shareholder deal was at an advanced stage.
“We anticipate the deal being concluded by the end of the calendar year,” he said.
Texton reported yesterday a 10.6 percent growth in distribution a share to 85.47c in the six months to June from the interim distribution of 77.25c a unit in the previous year prior to the fund’s conversion to a real estate investment trust.
Investment property income rose more than 25 percent to R271.8m from R216.9m.
The value of the fund’s portfolio escalated more than 40 percent to R2.21 billion.
Kane said it had been a busy and positive year for the fund, which had performed exceptionally well. The shares fell 4.19 percent to close at R10.06.