Jeff Zidel: Master Investor October 2016

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At the end of July 2016, Jeff Zidel, the highly regarded co-founder of Resilient, was named as the new President of the South African Council of Shopping Centres. This appointment marks a 45 year career spanning all aspects of the south African property industry. Currently, he is the Deputy Chairman of JSE-listed Fortress Income Fund and non-executive director of New European Property Investment PLC, as well as a director of the South African Property Owners Association.

“South Africa has one of the world’s leading shopping centre industries. There is a powerful opportunity to capitalise on our growing international profile as we become more active in the arena of global retail,” says Zidel. “It’s important to showcase the exceptional calibre of our capabilities and make it clear that we are worth taking seriously – both South Africa and Africa as a continent, and our skilled professionals.”
Over his extensive and distinguished career, Zidel has played a hands-on role in an admirable number of landmark shopping centre developments and deals, from running an estate agency to developing strip malls throughout Lesotho. He was the previous chairman of Proptrax (which has 2 ETFs listed on JSE) and he has been 3 times past president of Roodepoort Chamber of Commerce. Zidel was also the winner of 2010 ABSA Jewish Business Achiever of the year as well as being part of Nandos early expansion from 8 to 120 stores.
As the new President of SACSC, he has plans to build on the foundations that have already been put in place and find new ways to expand horizons for South Africa’s community of shopping centre owners and retailers.

First Investment

“In 1985 saw a wonderful opportunity to develop strip shopping centres throughout Lesotho,” says Zidel on his first major Property Investment. “The Lesotho miners excelled and had the best return rate on the SA mines. The SA and Lesotho Governments agreed with the miners to pay them a third of their wages to them and 2/3rd to their families in Lesotho. Lots of disposable income very limited shopping.”
All the land belongs to The Kingdom, and so the plan was would be to lease the land from them. They then planned to enter into a sub – lease agreement, which is usually for 25 years with 3 ten-year options. “Our first land rental was only payable on completion of the shopping centre (so very small holding cost). We eventually built 8 Centres throughout Lesotho.”
Zidel paid in cash for the first deal, then bonded the completed centre to build the next one.

The national tenants traded exceptionally well and it was not uncommon for them to receive twice the base rental from turnover clauses. Thus they were the first development in most of the towns, and all subsequent development sprung up around their shopping centres.

LESSONS LEARNED

– Don’t be afraid to go into new areas
– Develop where the National Tenants want to trade
– Overcome cumbersome bureaucracy, in our first development we needed ministerial consent four separate times. We engaged with Minister of Interior and by our third development only needed one consent.
– When Social Grants were introduced into SA (it had the same effect as the Lesotho families receiving miners salaries) boom times for ourselves and other developers of shopping centres especially in rural towns and townships.

SIGNIFICANT PROPERTY DEALS AND INSIGHTS

On 6 December 2002, Jeff Zidel, Des de Beer and Barry Stuhler listed Resilient Property Income Fund on the JSE with a market capitalization of under R500 Million.

“It has been an amazing journey, the ” Resilient Family of Funds” now consists of 6 separately listed property funds with a combined market capitalization of over R180 Billion.”

These include Resilient, Fortress, Lodestone, Rockcastle, Greenbay and NEPI ( New Europe Property Investments ). NEPI, Greenbay and Rockcastle all have JSE and offshore listings and invest in mainly shopping centres in Eastern and Central Europe, with largest investments in Romania (NEPI) and Poland (Rockcasle) and Slovenia (Greenbay)

Resilient develops dominant shopping centres in mainly non metropolitan areas, and has substantial holdings in Fortress and the offshore companies. Fortress develops large logistic/ distribution warehouses, as well as shopping centres focused on transportation nodes. Also has substantial holdings in the offshore companies
Zidel attributes a lot of his success to timing. “The strategy to go offshore paid off and has given our funds and SA investors rand hedge exposure (NEPI has shown over 12% pa growth in Euros every year since listing) while the size and liquidity matter, and the inclusion into local and foreign Indexes give the shares a huge growth in price and brought in new investors. When REIT legislation eventually happened, it gave certainty on tax issues and attracted foreign investors. ( SA is now 8th biggest REIT Industry in the world).”
ABOUT FORTRESS FUND

Fortress Income Fund was listed on the JSE on 22nd October 2009. The company is an innovative hybrid property REIT, which has two separate listings.

Fortress “A” is for the conservative investor and pension fund, which receives a fixed annual increase in distribution of the lower of 5% or CPI. The share listed at R9 and is now approx R16.20 a share.

Fortress “B” is for the more adventurous investor who backs management to out perform.

Once the “A” share distribution is paid all the increase in growth of distribution goes to the “B” shareholders. The increase distribution for year ended 30 June 2016 was 95.28%

The share price on listing 7 years ago was R1.00 it is now approx R33 per share.

It is a part of the Top 40 Index on JSE. Fortress “B” was The Sunday Times Top Company of 2015, having shown growth of over 75% pa for each of the last five years.

At the end of 2015 Fortress incorporated Capital Property Fund, taking its market capitalisation to just over R55 billion. They have also recently made an offer to do the same with Lodestone. “I am sure that going forward that with Mark Stevens the dynamic CEO and his team, Fortress will continue to grow.”
For the Future Fortress has the following plans in store. “We aim to keep investing in NEPI, Rockcastle , Greenbay and Hammerson giving rand hedges in dollars, Euros and pounds, and keep developing large logistics/ warehouse and leasing to blue chip tenants on long leases.” Fortress is about to start the development of a logistic park of approximately 370 000sq m on old Clairwood racetrack in KZN to top international standards and quality of approx.

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