JSE-listed Texton Property Fund wants to strengthen its balance sheet by selling some of its underperforming offices and then investing further into varied property asset types, some of which are in the US. The asset disposal funds will be used to reduce debt.
Texton’s CEo Pienaar Welleman explained this in its financial results which were released for the six months to end-December 2022 on Tuesday. The group reported that its loan-to-value (LTV), a measure of the financial health of a property company, had fallen from 37% to 26.9%. This is calculated as a group’s debt relative to its asset base. Fund managers tend to prefer for Reits to have LTVs below 40%.
The group’s long-term debt was reduced by R319m during the reporting period, of which R186m is a permanent decrease in long-term debt. Texton has R279m in debt, excluding debt facilities.
“We are well positioned with a strong balance sheet and sufficient liquidity to prudently deliver on our strategy,” Texton said.
Texton used R395m gained from asset disposals to pay off debt and diversify its investments. In SA, Texton said it would continue to invest capital into its assets to attract and retain small and medium-sized enterprise tenants, as opposed to larger office clients for example.
At the end of December, Texton’s direct property portfolio was valued at R2.2bn, with indirect property investments having increased from R189.2m to R538.5m.
The company received dividends of R4.6m from Blackstone Real Estate Income Trust iCapital Offshore Access Fund SPC and R4.9m from Starwood Real Estate Income Trust Offshore Fund SPC for the six-month period. Of this amount, R85m was allocated to Cadre, of which R32.8m was invested in multifamily long-stay residential assets in the US.
Through its subsidiary, Discus House Proprietary, Texton bought 685,182 shares held at treasury for an average of R3.51 per share. Discus House holds 31,853,013 shares in treasury as of December 31. Texton also bought 1,937,315 shares at an average of R3.24 per share .
“We will continue to repurchase shares in the market as they become available in line with the shareholder-approved AGM resolution,” said the company.
Texton declined to declare an interim dividend, saying its funds would be used to manage the liquidity of its balance sheet. Reits are required to pay at least 75% of their distributable funds as a dividend each financial year, or they lose their Reit status.