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
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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.
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