Resignations add up in listed property

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Louis Schnetler resigned as CEO of Delta International in April

When Delta International CEO Louis Schnetler abruptly resigned in April, investor jitters followed.

Already the share price of the Africa-focused property fund has been an underperformer in the listed property sector, having been down 13.2% for the past three months.

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This was the second leadership change Delta International suffered, as Paul Simpson moved to a role within the company before the fund’s reverse listing into Osiris Properties on the JSE in July last year.

Schnetler was roped in to chart Delta International’s investments into Mozambique and Morocco. And Schnetler’s resignation, says director of Meago Asset Managers Thabo Ramushu, was puzzling considering that he had been recently appointed.

Even more concerning was the timing of his resignation, as it was days before Delta International’s capital raise to finalise the transfer of its 4 764 square metre Zimpeto Square, a shopping centre located in Mozambique’s capital of Maputo. It subsequently raised about R515 million.

It seems that there is now stability in the leadership of Delta International, which has a primary listing on the Stock Exchange of Mauritius. The fund recently announced the appointment of founding member Bronwyn Corbett as CEO.

“Corbett is familiar with the set-up. But the worry is whether she will be able to relocate to Mauritius as planned with the previous CEO so that Delta International satisfies the domicile requirements of being based in a foreign country,” says Ramushu.

Schnetler’s resignation was followed by more leadership changes in the sector. As listed property manager for Old Mutual Investment Group’s MacroSolutions Evan Robins puts it: “This is the greatest spate of resignation I can recall, but there are now more funds than there were in the past.”

Another figure to resign in the sector was Emira Property Fund CEO James Templeton, after being at the helm for more than ten years. The market has welcomed the change, as the new CEO is expected to bring fresh ideas to the fund, which has a market capitalisation of R8.7 billion.

Ramushu says Templeton has built a strong reputation in transforming Emira, particularly in reducing the fund’s exposure to the ailing office space and bulking up retail assets.

However, Templeton’s successor Geoff Jennett raised a few eyebrows. Jennett, who was Emira’s chief financial officer, is untested in the listed property sector despite having a strong financial background, Ramushu adds.

Where most industry players rate a smooth succession plan is with Investec Property Fund, after real estate veteran Sam Leon resigned. Leon was replaced by Nick Riley, who is, at age 36, one of the youngest CEOs in the listed property sector.

Having spent 11 years as a charted accountant at Investec’s corporate finance division before joining the property fund, Riley is considered to have risen through the ranks to now manage a R16.4 billion property portfolio. Perhaps what is comforting to shareholders is that Riley still has the support of Leon who remains on the board as a non-executive director.

“In fact, the appointment of Riley at Investec Property Fund has already borne fruit,” says Grindrod Asset Management chief investment officer Ian Anderson, as the fund announced the acquisition of the property portfolio of developer Zenprop for R7.1 billion. This is the biggest deal in the fund’s four-year history and represents the first deal since Riley took over the reins.

Turbulent succession planning

In some cases, succession planning has been bumpy. The sudden resignation of Texton Property Fund CEO Rob Kane and finance director Marelise de Lange saw a shake-up of the fund and the subsequent appointment of Angelique de Rauville who is well-known in property circles. More recently CEO of Romania-focused New Europe Property Investment’s (NEPI) Martin Slabbert resigned.

Ramushu says Slabbert’s departure was linked to the rejection of a proposed share-based remuneration, which shareholders were unhappy with due to the cost proposed. Alexandru Morar, who has been part of NEPI since its inception, was named CEO.

Says Anderson: “The departures at NEPI and Texton also represented the departures of the people responsible for assembling the portfolios and delivering exceptional results for investors. Their replacements will definitely have their work cut out for them emulating the successes of their predecessors.”

Perhaps the most concerning is the ructions within troubled Hospitality Property Fund, which has not only suffered from industry specific blows but also the suspension of its CEO Andrew Rogers.

Hospitality, the owner of hotels which include Arabella Hotel & Spa in the Western Cape and Holiday Inn in Sandton, saw the sacking of Rogers following allegations of misconduct revealed by an investigation. Management has been mum on the nature of the misconduct.

“For Hospitality, the situation is far more serious and although the company didn’t suffer a financial loss, the reputational damage was significant and is clearly still impacting on its share price,” says Anderson.

The share price of Hospitality A has been down 15% in the past six months while Hospitality B increased by 23% in the period.

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