Real Estate Investor Magazine South Africa July 2014 | Page 42

STRATEGIES BY JONATHAN S SMITH Commercial Success Strategies to amplify your returns T he number of commercial property owners who do not extract the full value potential of commercial property and do not realise the extensive financial benefit of managing a property portfolio in an exemplary manner, is surprising. A list of typical holdings in the South African environment provides some perspective as to who can benefit from sound property management of fixed property. Typical South African holdings • Public and listed property funds which own property as an investment for the benefit of their respective shareholders • Private equity property funds which, again, own property as an investment opportunity for their respective shareholders • Large corporates which own directly used fixed property, which is used for their own business • Large corporates which own surplus commercial property which is currently unproductive, with holding costs that result in a negative return • Large corporates who rent fixed property (such as branches or regional offices) for their operational use • Smaller corporates who own directly used and surplus fixed property • Smaller corporates who rent fixed property for their operational use 40 July 2014 SA Real Estate Investor Two strategies for success The secret to using property holdings to amplify overall return lies in establishing and implementing two strategies: [1] identifying the optimal investment strategy for the company and integrating the property portfolio into this investment strategy; and [2] implementing the best property management strategy for the property portfolio. Identifying the optimal investment strategy When assessing the optimal use of commercial property, it is critical to integrate the company’s overall strategy with the strategic ambitions for the property portfolio. This may seem simplistic, but so many private equity funds, corporates and smaller commercial property users miss out on developing a sound propert y consumption strategy and ensuring that this property strategy is correctly integrated into their overall corporate strategy. And, as a result, these companies lose the enhanced returns which correctly strategised and correctly managed portfolios can achieve. In developing a sound strategy, corporates should employ a process which strategically links the five core divisions which make creating sustainable profits possible. www.reimag.co.za