Capital Property Fund to become specialist fund

Capital Property Fund to become specialist fund

Plans to reduce its exposure to retail.

Capital Property Fund (JSE:CPL) says it is in the process of gradually reducing its retail exposure as part of its strategy to become a specialised office and industrial portfolio.

“If you look at the major listed sightings that are the most highly rated offshore, they are all specialist funds,” executive director Andrew Teixteira told Moneyweb. He added that by providing a specialised product, people know exactly what they are going to get. “If you buy Resilient shares, you’re buying into regional retail. If you buy Capital, you’re getting into office and industrial.”

Teixteira added that it had inherited a substantial retail portfolio after the acquisition of Pangbourne in 2011. “The strategy has always been to be a commercial and industrial fund with the sale of the retail.”

Asked if Capital was not concerned about the relatively high vacancy rate especially in office space, MD Barry Stuhler replied that the vacancy rate would probably deteriorate further before improving, but he believed it was part the ongoing cycle in the industry.

“We’re not building for today or tomorrow …at some point in time the vacancies are going to be taken up and we’ll be in a really good position. We will have lots of supply,” Stuhler said.

He was speaking after the release of Capital’s results in which it posted a 9.13% rise in distributions to 65.63c per unit for the year ended December.

Stanlib’s head of property funds, Keillen Ndlovu, says: “This is a good result achieved in a tough market, more so with the depressed office market, of which Capital has 30% exposure by rental income.”

On the vacancies, Ndlovu said the decline in both the office and industrial portfolios was to be expected and was a national trend, given the weak fundamentals currently in the sector.

Stuhler said historically Capital acquired properties rather than built but due to current “crazy prices” the company had decided to opt for building rather than buying. “It’s very simple, that’s the pipeline,” he added.

He said Capital had obtained quite a lot of land following its acquisition of Pangbourne, making it the third largest property group in the country. The fund had partnered with Improvon, which specialises in industrial and commercial facilities in developing land in Gauteng and the Western Cape.

The company is also currently looking at acquiring new land in Gauteng and in Durban, KwaZulu-Natal.

Teixeira says the company only builds on 50% of their sites allowing space for truck reticulation

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