In December 2017, Futuregrowth’s Community Property Fund acquired its 19th retail property with the purchase of the Heidelberg Mall south east of Johannesburg.
The Community Property Fund, which invests in shopping centres in underserviced communities across South Africa, has unlocked significant value for investors in this space, delivering a 14.05% ungeared return in the 12-month period to December 2017. The Fund has had an exceptional three years, where the annualised return on an ungeared basis was 18.53%.
Futuregrowth and their partners, Capital Land Asset Management (Capital Land), have built a strong reputation for rejuvenating struggling shopping centres, and portfolio manager Smital Rambhai is excited about the prospects for the Heidelberg Mall.
“Capital Land has established relationships with all the major retailers and through our proactive approach we believe we can expand the current retail offering to further enhance Heidelberg Mall as the dominant shopping destination in the catchment area,” says Anton Raubenheimer, the financial director of Capital Land.
The Community Property Fund’s philosophy has always been to “bed down” its assets and make sure they are running optimally before taking on new acquisitions. This is the Fund’s first acquisition since 2009, when it bought Bridge City Shopping Centre in KwaMashu.
“Taking our time to find properties that genuinely offer value - and making sure we unlock that value - is part of our responsible investing philosophy,” says Rambhai.
“We won’t buy a property if we don’t have the capacity to develop its potential. We differentiate ourselves from the majority of listed property companies that are income focused, by focusing on property fundamentals and growing the net asset value of the properties over the long term. Some of the income generated from the properties is utilised to reinvest back into the property to ensure the long term sustainability and marketability of the shopping centre.
This approach has served investors well and the Community Property Fund outperformed listed property by 6.82% on a 3-year annualised return as at 31 December 2017.
Prospects for Heidelberg Mall
The Heidelberg Mall offers over 120 retail stores and caters to various LSM groups. Checkers, Game, PEP and Ackermans are anchor tenants, and there are a few retailers catering to upper income earners, too.
“The days of shopping centres focusing exclusively on certain LSM groups are starting to fade as residential areas are becoming more integrated,” says Rambhai.
One of the planned new revenue streams is outdoor advertising.
“The mall’s position next to the N3 highway is hard to beat, and there is very little outdoor advertising in this area to compete with,” says Rambhai. “People often underestimate the value of outdoor advertising. Yes, advertising brings in revenue, but it is also an effective way to drive traffic to the mall.”
There are also plans to relocate the existing taxi rank from the perimeter of the property to one of the main entrances. This will make life easier for employees, as well as elderly shoppers and parents with small children.
“Servicing the communities around our properties is essential and we will keep looking for new ways to improve their experience,” says Rambhai.