Interview with Athol Campbell

Posted On Monday, 21 February 2005 02:00 Published by eProp Commercial Property News
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Interview with Athol Campbell - CEO Pangbourne Properties.

Property-Housing-ResidentialMONEYWEB: Athol Campbell is the chief executive of Pangbourne – 250 buildings, 914 tenants. Financial results out today for the six months till December. What I did find very interesting, Athol, in the numbers is that you renewed 128 leases. Now, anybody who is in business and has premises has a lease. And 128 renewals is quite a lot of experience in six months. Are you finding that the tenant is winning this time, or are you as the landlord able to bump up your prices?


Well, since you’re a tenant I’d have to say the tenant wins every time. We are being able – I won’t say it's a landlord’s market at the moment, but certainly in the industrial market, with the space having been taken up, there’s virtually no large space available anywhere in Johannesburg or South Africa, really. Obviously it is turning in the landlord’s favour at the moment.


So the economy is translating into real growth, and that is a level that one would see it at.


Yes, I think if you take our type of portfolio, which is a large number of buildings, an assorted number of tenants, at the level of 95% full we’re probably slightly over-full. Our norm should be around an occupancy of around 93%. So that’s probably an indication of the market.


As a tenant who’s got a long-term lease, fortunately we don’t have to re-negotiate at this point in time. But, going on to that 95% occupancies – if we remember last night, David, we spoke with Piet van Hoven of Comair, they’re delighted to be at 76% occupancies. And if you remember the City Lodge results, they were in the 70s as well. So the secret here of getting to 95% is something that we’d really like you to share with us, because perhaps there’s other who can benefit as well.


Well, I don’t think you can really compare us to hotels, but it's really a function of the market. I think good tenant retention. We focus a lot on keeping our tenants. Obviously from a cost point of view it it's much cheaper to renew a lease than replace a tenant. Your installation costs and things like that are much cheaper. But we’ve worked our portfolio. Places like Benrose, which you’ll remember we got out of the Pioneer portfolio when we took that over two years ago, occupancies there were, from memory, about 70% when we bought it. Benrose is now 93% occupied.


That’s where you make money. It is a property, as a landlord.


Yes. We don’t pay for the vacancies. You know, Mark Weiner and Apex always say they don’t pay for vacancies, which is an admirable thing. We don’t either. I mean the eThekwini portfolio we bought in September, or the transfer went through in December, was Oxford Manor, near Thrupps on Oxford Road. Large portions of that had been standing empty. Well, we filled it above budget very quickly. So I think our expertise lies in letting buildings.


What about the people who are listening here who might have invested in the residential property market, might have four or five sites where they have difficulty in keeping tenants, or in fact replacing tenants – and we’re certainly seeing that at the moment with the rental market. What’s your advice to them? Drop your rentals or …?


Yes, keep your tenant, because you don’t have that empty period. You know, we usually budget on between two or three months when a tenant vacates that the property will be vacant, depending on the obviously on the property. But if you look at the revenue you lose for three months being vacant, because you’ve still got your costs running, you’ve still got your rates to pay, you’ve got your insurance to meet, and in a lot of the residential market people are still paying their bonds. So you have a negative cash flow for three months. It takes you a long time to catch that up.


Well, there’s some pretty good advice there. The investment analysts, you were telling us earlier, were a bit concerned about the rising costs.


Yes, I think if you look at the broad figures, you will see our costs from interim to interim have almost doubled. And I think the concern is that there’s a lot of admin costs going through. The explanation for that is very simple. First of all, you’ve had iFour, which we administer their buildings. They’ve increased their portfolio from R700m to R1,8bn. So obviously we will get a large increase in property management fees that we earn from that portfolio. But, more importantly, it's come out of Performer, which is our property finance business. Now, you’ll see in our results, Performer’s bottom line has increased 226%. Now a lot of Performer’s costs are commission-related. So obviously, with a huge increase in turnover and volume that that company has had, your commissions go up. So our real cost increases are somewhere around 7%.


R9.62 is where the share price closed today. A new high up from R9.55. Mr Shapiro? Remember, it was one that I liked. I think it was two years ago it was my …


I just think in an environment here where you’re getting interest rates likely to fall again, the property trust, that whole industry, particularly the good one, has to be a place where you can put cash and earn good returns. And there’s no sign yet, as Athol says, of things slowing down. So you’re probably going to get increases in your rental income for the next two, three years.


One you like, Imtiaz?


Absolutely. As David says, to me these property trusts are really bonds. If you can buy a South Africa government bond at, and they’re trading at close on 8% right now, you can buy some of these property trusts well in excess of that. So to me you’ve got the underlying security, not dissimilar, and you’ve got a much better yield. So for widows and orphans, provided interest rates don’t rise very sharply, it's a nice investment to be in.

Last modified on Tuesday, 13 May 2014 13:48

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