Perspectives on property: leading CFOs share insights
CFOs who are handed property portfolios or commercial challenges with a property aspect really have a great opportunity to get closer to the business. And with a closer handle on your business you become a better CFO. This was the view of guests at last night’s CFO South Africa dinner, which was filled with great insights, perspectives and relationship building.
Kobus Gertenbach, Group CFO of Premier Foods, was candid about his property experience: "The history of Premier is remarkable and I have learnt a huge amount during my time with the business. I was fortunate enough to have a two-month window just before I joined and visited every site. That put me in touch with the business and its people."
"Did you know anything about baking or milling on arrival?" enquired Ajith Haripaul, CFO of EY. As it turns out, Kobus had no previous knowledge of baking or milling and as he shared his own journey through six years, it became clear that he has walked a long road with a lot of lessons. Adding confectionary and a home and personal care line to the business added further complexity. "We've outgrown office space and shortened time horizons from ten to four years on a rental. We've customised a fleet repair space to become a bakery for a new product line and we've grown a fleet of over 100 vehicles that needed to be secured appropriately overnight. We also realised that we needed to own all properties that were key to our production. I don't believe it's really possible to be a good operational management team and have a good handle on property issues, given the complexity and speed of change. In this sense, having a partner like JLL has been absolutely crucial to our success."
The theme of choosing effective partners received much airtime as CFOs reflected on broad spectrum of challenges they face. Ramasela Ganda, CFO of Barloworld Equipment Rental and Used Sales, said: "Of course there were huge property challenges for Ekurhuleni Metro and during my short tenure with Barloworld I see new and perhaps even more complex challenges. Both organisations must live with their legacies and look ahead to future proof themselves by right sizing and improving the efficiencies of their property assets."
Simon Wade, Head of Commercial solutions at JLL, was quick to point out that it is not only in the owning of property that organisations need to future proof themselves. "A careful analysis of your rental portfolio could save your business millions of rand a year and, as the tenant, you should be bold when discussing your needs with landlords. Accepting year on year escalations without an understanding of your future need can create unnecessary drag on your cash position," he said.
"It's one of the main drivers for EY choosing to lease and not own properties," noted Haripaul. 'Partnership environments are extremely dynamic and relatively cash intensive. By not owning the buildings we're able to be far more agile as a business even though the logic would suggest that owning property in Sandton, if you have a long-term view of your location, would make more sense."
On the other end of the spectrum, Laureate International Universities entered the tertiary education market in South Africa through Monash University and inherited a large property asset which is not part of the global strategy but was simply part of the deal. "We sit on a large parcel of land which needs to be developed and leveraged and a sale-leaseback arrangement is one option we are considering," said Alvin Liew, CFO of Laureate South Africa. "We have noted that the South African tertiary environment is very dependent on location and we have looked at new campus sights even in the heart of Sandton."
It was not all serious property talk and CFOs enjoyed an evening of fine dining and good conversation. Humour and creativity were in abundance, with one CFO quipping that sale-leaseback arrangements are excellent, as long as you do not have to stay on to lease the property! As the evening progressed, CFOs shared details and promised to do business, share networks and help one another - the ultimate goals of all CFO South Africa events.