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A conscience and good returns

Posted On Friday, 13 September 2002 02:00 Published by
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The Futuregrowth Property Fund is an unlisted property loan stock that owns and manages 13 shopping centres in underserviced areas in SAs secondary towns and townships
The Futuregrowth Property Fund is an unlisted property loan stock that owns and manages 13 shopping centres in underserviced areas in SAs secondary towns and townships.

Nine of the retail centres are in areas identified as urban renewal zones by President Thabo Mbeki in 2000. It shows that Futuregrowth is following SAs developmental needs, says portfolio manager Wayne van der Vent.

He says big businesses havent gone to places outside the big regional centres. But many of the areas are huge cities, with large populations.

The retailers havent come to the party and taken the bold step of putting good quality shops into these areas. Theres a strong resistance because of the high HIV/Aids infection rate.

He says a centre must be a one-stop shopping facility or the community goes elsewhere.

Futuregrowth monitors the social impact of its property fund because of its developmental nature. It has calculated that 3000 people are directly employed as a result of the centres and 15000 people are directly affected by the employment they create.

Sometimes the retail centres have created new towns and in many instances Futuregrowth has put in municipal infrastructure such as water and sewerage because they are virtually nonexistent in these areas. Fresh water is a big problem. In some centres, we have put in a sewage treatment plant.

Futuregrowth has also set up a schools feeding programme and supports a school for mentally handicapped pupils. Van der Vent says one of the centres had a Bake for Profit competition, sponsored by Snowflake. Money was donated for training and the two winning students received ovens.

They are now making money using their new skills. He says: These initiatives create a relationship with the shoppers in the centre.

The shopping centres serve the basic daily needs of the consumers in the area, says Van der Vent. We dont aim to capture a trolley spend; we cater for the high-volume basket shoppers. A dip in the economy doesnt affect us because we dont operate in the luxury end of the market, such as high fashion and high-end furniture. We have Pep as opposed to Foschini.

But its not about only social impact. The R250m fund has provided superior returns to its investors. It outperformed its target of inflation plus 4% for the past three years. And in the year to endJune, it delivered returns of 15,29% compared with its 12,9% benchmark.

The shopping centres it develops are usually between 7000m and 10000m and anchored by a national retail group. In KwaZulu Natal, the anchor tenants are often a Boxer store; in Northern Province they are Score shops; and in the other provinces Shoprite Checkers.

Each centre has between 15 and 40 tenants, including furniture, retail and household stores and banks. A quarter of the space is available to local tenants. Van der Vent says often a spaza shop buys a franchise business and moves from the informal to the formal sector.

Each of the centres has a taxi rank, which provides opportunities for local entrepreneurs to put in filling stations or establish adjacent shops.

To limit the risk of one centre having too great an effect on the performance of the fund, none of the centres comprises more than 10% of the portfolio.

Financial Mail

Publisher: Financial Mail
Source: Financial Mail
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