Shop 'til you drop
Pareto has developed and nurtured a reputation for being the go-to investor in South Africa's blue chip malls
Writer Matt Bone
Project manager Arron Rampling
Since its formation in 1998, Pareto have quickly grown to become one of the most highly respected property loan stock companies in South Africa. Their strong focus on acquiring and enhancing super-regional and regional shopping centres in South Africa, as well as mixed developments, has seen their market cap rise.
Marius Muller, CEO of Pareto said: "We own and invest in shopping centres and ensure that the buildings are everything that a customer and a rental business could need, we pride ourselves on this level of service."
Muller has been with the company for four years, and has watched a constantly changing and volatile market rise and fall every day, "The market is ever changing, if your tenants cannot pay the rent due to rising costs and lack of company growth, then you are left with a problem as an investor. Companies have to re-evaluate their needs and wants. I have seen many companies reinvent themselves to become bigger and more successful because they looked inwardly and saw where they could grow."
This mentality of inward focus has played a major role in the restructuring of Pareto. As of 1st April 2014, the company will internally manage all of its 100% owned assets: "This has been a big positive step for us. We anticipate that our property values will rise countrywide due to us being able to offer a much more focussed quality of property management service and ensuring that our meticulous standards and best practices are met."
Building the Future
Pareto have put their expansive investment knowledge into some exciting new projects including, revamping, reconstruction and expansion of Pretoria's Menlyn Park and Durban's Pavilion Shopping Centre. It does not stop there, Muller is always on the lookout for a new investment opportunity for Pareto, with which they can invest time, money and above all else, a service that is of the highest calibre.
However, there are always obstacles with any big profile work. Disproportionate rises in both municipal taxes and electricity costs have forced Pareto to look at each project in very close detail, to ensure there are no financial oversights. "It is going to be a lot more challenging with interest rates on the up, our mortgages have gone up and the market is anticipating at least three more increases this year. The cost of borrowing is more expensive and we will review the projects thoroughly again before making a final commitment. We have one eye on the building and one eye on the markets," cites Muller who prefers to be cautious and is always aware of market forces.
National electricity providers have raised the prices mainly due to the knock on effect of infrastructure improvements and expansion. This has been the biggest financial strain on Pareto's portfolio and something Muller insists, needs to be looked at: "In the 4 years that I have been with the company, our outgoing cost for electricity has doubled. That is a massive hike from what it was. For me, it is because the growth in the economy has outstripped the historic energy supply and the power companies have not been able to handle the growth. This becomes a problem for us when we cannot guarantee electricity for our buildings or alternatively, have to provide it at an unsustainable cost."
"If you are an owner with a significant property portfolio, the management services you are currently utilising may not provide a good enough level of service for your needs," said Muller. Landlords with a smaller portfolio have had to outsource their management due to lack of funds, time and manpower. This can cause a problem as they then suffer from below par services for their tenants. Muller muses on this point: "This is the big challenge in our industry. How to enhance the value of the property you have, without compromising your bottom line. There is a fine line between being profitable and offering your clients solutions to suit their needs. We understand this and always ensure that our management is fully aware of the situation and can strike a good balance between landlords and managers."
Pareto's strong customer focus and competitive nature offers its shareholder an investment that can only benefit their long term goals. Mr Muller agrees this long term vision is a key focus for Pareto: "From our point of view, if we use the money that we have saved by having our portfolio managers in house, pump it back into our projects and the people, in terms of services and management services, the property can only increase in value. We are going to spend money on our properties, so why not also spend this saved money to help the people who have invested with us. In the end, if you can only see short term profit, then you will miss the long term investment."
Not Just a Job
Marius Muller is a CEO who implements a hands-on approach to his work. For him, it is not just a job it is a passion: "I wake up every morning looking forward to going to work. I am excited to be in my dream job. I have the chance to really change the face of the building investment market for the better in South Africa. If I can contribute in any way possible to give previously disadvantaged individuals the opportunity to contribute positively to improving the economy of our country, whether in terms of working within the company, or offering them services and giving them a previously unobtainable opportunity, then that is what I will do."
With a CEO at the helm with a long term vision and strategic goals, which he fully intends to meet and exceed, Pareto is very well placed to maintain its reputation as a dominant force in the investment market.