Property Management — A matter of Give and Take

Pareto Limited CEO (Left), Marius Muller said his company had taken property management in-house, but Sam Leon (right) CEO at Investec Property Fund, says his group recently outsourced its property management.

Pareto Limited on Monday said it had taken property management in-house and consolidated trading activities under one specialised business unit, while Investec Property Fund Limited come out in support to outsource its management.

It is believed that most analysts prefer internal management structures because objectives are more aligned with unitholders' interest.

Pareto has opted to replace its outside property management with an internal management structure, saying it will optimise performance and boost capacity to create positive relationships with its clients and partners and, importantly, to deliver improved service at its shopping centres.

The news comes shortly after JSE-listed Investec Property Fund outsourced its property management service to Broll Property Group. Investec has a portfolio of 61 properties across South Africa valued at R6 billion of which Broll will manage 52 properties.

Pareto's move, which follows the example of fellow listed property group, Synergy Income Fund which also brought its full management operations in-house, which has become a trend amongst other REIT's in order to reduce property operating expenses.

William Brooks, CEO of Synergy, said that a simpler, more efficient structure would deliver better value to investors, better align management structures to investor objectives and produce numerous long-term benefits.

Marius Muller, CEO of Pareto explains: “We are reclaiming our communication lines to ensure the best experience for everyone, from shopping centre retailers and customers to retailers at corporate levels, our service providers and our own team.”

Pareto owns Cresta Shopping Centre, The Pavilion in Durban, Mimosa Mall in Bloemfontein, Southgate Mall and Value Market and Westgate Regional Shopping Centre, both in Gauteng. In Cape Town it owns Tyger Valley Shopping Centre. It also owns a 50% stake in Cavendish Square, also in the Mother City; and, a 50% stake in Menlyn Park Shopping Centre in the East of Pretoria.

Pareto holds 25% of Sandton City and its surrounding assets including the Sandton Convention Centre and three hotels: The Sandton Sun, The InterContinental Johannesburg Sandton Towers and Sandton Garden Court. The group manages all five of its wholly-owned shopping centres and will take over management responsibility of Tyger Valley Shopping Centre from September 1 2014.

While cost-cutting for its retail property management isn’t the aim of adopting the new structure, Muller expects there will be some savings because of the change. “Any savings will be reinvested into our shopping centres through our head office support structure.”