Christo Wiese is exiting Texton Property Fund, a real estate investment trust that has underperformed the market amid numerous management changes and has lost the interest of various fund managers.
The retail tycoon has been reshaping his investments after he sold down his stake in embattled Steinhoff International. Texton has been battling the negative sentiment that UK commercial property has faced since the Brexit referendum.
"The price offered for our stake in Texton was attractive. It was an unnecessary portfolio investment, so we have chosen to sell at a very good price. We have an investment in Tradehold, which is a property company which we feel has strong potential," Wiese said on Friday.
Tradehold is focused mainly on UK real estate but also holds African property development interests, including in Namibia, along with specialised financial services in the UK and SA.
Tradehold and Texton together developed the Broad Street Mall in Reading in the UK through a joint venture. But Wiese also said that a merger of Texton and Tradehold had never been on the cards, despite Texton having been rumoured to be a takeover target of Tradehold.
Texton, meanwhile, is rolling out a strategy to recover from difficult market conditions, but market commentators expect it will take more than a year to see results. Texton has had three CEOs in four years.
However, there is optimism that current boss Nosiphiwo Balfour can turn the fund around in her first role as head of a real estate investment trust.
"Low economic growth associated with the current South African environment, coupled with economic uncertainty in the UK, has perpetuated a challenging operating environment for Texton.
"While the company is defensively positioned, downward pressure on rentals, combined with a sluggish economy impacting tenants, has resulted in a low-growth environment," Texton said in March, when it released financial results for the six months to December 2017.
Texton has about 40% of its assets in the UK and about 60% in SA. Wiese had said he would sell out of Texton, of which his Luna Group owned about 17%.
Garreth Elston, a research analyst at Golden Section Capital, said Texton was under continued pressure.
"We don’t see the pressures dissipating soon. Both the UK and South African portfolios remain strained and we are not seeing any concrete catalysts yet that could herald a reversal of the company’s fortunes.
"It is trading at a very high yield, and we are not convinced that distributions are sustainable," he said.
Texton, has completed its portfolio rationalisation programme and states that its South African portfolio remains defensive given weakened property fundamentals.
*We incorrectly reported that Texton sees its South African assets as secondary and needing to be sold.