Texton: is this the right use of capital?


Texton: is this the right use of capital?


Published Date: 2022-01-11 | Source: INCE|Community | Author: The Finance Ghost

Texton: is this the right use of capital?

Texton Property Fund is a REIT that has had a tough time. Things were rough even before the pandemic, as the fund's UK strategy took significant pain from Brexit and related uncertainties.

The latest news from the company is that it will be investing further in Starwood Real Estate Income Trust Offshore Fund, taking its stake from USD3.5 million to USD7.0 million. Texton will only hold a tiny stake of just 0.21% of the fund's shares.

Starwood is a non-traded REIT focused on real estate in the United States. It focuses on stabilised, income-oriented commercial real estate. The fund also acquires debt secured by properties. There is some exposure to Europe as well, where the company invests in both properties and in property-related debt.

Starwood's total assets under management is $18.2 billion, consisting of 334 properties and with an occupancy rate of 96%.

The SENS goes on to explain that 70% of the fund is invested in "multifamily" property which I can only take to mean apartment blocks. I'm not sure how that could be described as "commercial real estate" but then this is the US and they do like to use different words to everyone else. 15% of the fund is industrial property, 8% office, 3% loans and a few rates and mice make up the balance (e.g. hotels).

I can't help but feel that Texton would be better served by just buying back its own shares with excess capital (essentially investing in itself) rather than deploying capital into a tiny stake in a US fund. If that isn't an option, then it would make more sense to buy specific properties rather than diversified stakes.

Investors rarely react with joy to news of capital allocation decisions like this, preferring management teams to focus on core competencies and return any capital that can't be deployed within that strategy. The JSE has had many examples of companies trading at significant discounts to NAV because they hold a portfolio that isn't coherent.


Haroon 6 days ago

Texton has two major shareholders who are probably desirous of owning Starwood and are using Texton to achieve their personal objectives, The SENS does not explain rationale and benefits of this acquisition

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