After more than 20 years at the helm the tenacious dealmaker has been instrumental in boosting the finances of a loyal following of investors. Under his leadership the market cap of the Resilient group and its associated companies ballooned — from less than R500m at listing in 2002 to more than R150bn at the height of the JSE’s property boom in 2017/2018. He shares his thoughts with the FM.
What attracted you to the property sector?
As general manager in property finance at Syfrets, where I had moved after starting my career in Barclays’ participation bond division, I received permission to invest directly in property — though this was generally against policy at the time. In 1993 I bought a portfolio of four industrial units in the south of Joburg and a few small retail properties with partners. The country was very unsettled, but I knew there was deep value; and in 1994 Madiba “saved the day”. We had a smooth transition to democracy, and a few years later I sold these investments at a decent profit.
You’ve often ventured into untested sectors before they become fashionable, such as Eastern Europe and South African township malls. How do you spot potential moneymaking opportunities before the rest of the crowd?
I’m adventurous — some would say too daring — and I’m not intimidated by uncharted territory. We always do a deep dive into potential growth opportunities. A lot of work goes into understanding the assets. We won’t invest in anything unless we’ve done proper research. I also think my exposure to investment banking taught me a lot.
In 2018/2019 allegations of share price manipulation at Resilient and its then associated companies Nepi Rockcastle, Fortress and Lighthouse triggered a huge sell-off of Reit shares. The Financial Sector Conduct Authority (FSCA) later found no wrongdoing in the group. Could the value destruction have been avoided?
Going into 2018, after the breaking of the Steinhoff scandal in 2017, regulators and investors were very unsettled. Resilient and the companies it was involved with were highly valued by the market and became a target for hedge fund short sellers. In the climate of fear it was easy to generate publicity for sweeping allegations of wrongdoing. To be fair, the JSE had no experience in dealing with a concerted “short and distort” campaign and was probably spooked by what had been missed in the Steinhoff saga. I do feel the JSE handled the matter poorly, to the detriment of shareholders, but I have a lot of respect for the FSCA — it is clearly stretched thin. At the time, its investigations were thorough and professional. We are still awaiting the outcome of investigations into the conduct of those who orchestrated the campaign.
What was your takeaway from that time?
That the truth will out. We were comforted by the support we received from our advisers, Java Capital, and local asset managers who did their own homework and realised the allegations were unfounded. But I’m happy that chapter is behind us.
There was talk last year of delisting Resilient. Is that still on the table?
The allegations and prolonged FSCA probe that followed distracted us from our core focus. It’s difficult to run a business when you’re dealing with soap operas on the side. We wanted to delist the business but there was a big pushback from investors. However, given the ongoing flow of funds out of the Reit sector, the opportunity to go private may arise again in future.
It’s difficult to run a business when you’re dealing with soap operas on the side
What was the best investment you ever made?
It was backing New Europe Property Investments (Nepi) and Rockcastle, which later merged into Nepi Rockcastle. When we co-founded Nepi in Romania in 2007, Eastern Europe was completely off investor charts. Back then the move raised quite a few eyebrows, but we were confident that we could successfully replicate our South African business model in the region. And Nepi Rockcastle continues to go from strength to strength.
What was the worst investment you ever made?
That was Pangbourne Properties. In retrospect, our involvement in early 2011, just before South Africa went into a recession, wasn’t worth the aggravation. The company was in serious trouble and in much worse shape than we suspected.
Where would you invest your money now if you had a three- to five-year horizon?
I’m not overly excited about any sector or opportunity at the moment. I do, however, like Lighthouse Properties. The market demands immediate results, but there is plenty of value to be unlocked in the company’s French shopping centres over the next few years. I also have no intention of selling my shareholding in Resilient, as the strategy to own the dominant shopping centres in some of South Africa’s largest mining, commodity and agricultural belts is likely to continue to pay off. Like most investors I am worried about the investment flow of funds out of the JSE, the country’s growth prospects, the deterioration of infrastructure and the level of emigration, especially among young professionals.
Why are you retiring now?
My three children are all living and working in London, which means my wife is often MIA. I want to spend more time with my family, but I have no intention of leaving South Africa or selling my Joburg home. Most of our friends live in Joburg, so we’ll divide our time between the two countries. I also think 63 is the right age to step down. Fortunately, Resilient has a good succession plan in place and (CEO designate) Johann Kriek is well known and respected by our investors. He has intimate knowledge of the retail sector and has been with the group for more than 20 years.
Are you leaving the property sector for good?
I will remain on the Resilient board. I have full confidence in its board and management team and look forward to contributing as a truly nonexecutive director.
What’s next on your to-do list?
Like most retirees, I want to travel extensively. Eastern Europe is at the top of my bucket list. Though I know Romania and Bulgaria well from my years with Nepi Rockcastle, I would like to explore these areas with my wife, who has never been there.
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