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Myles Kritzinger, the CEO of Transcend Residential Property Fund, is providing a platform for affordable multifamily rental housing with great investment potential—we just need to work together to achieve it

The Transcend Residential Property Fund is a specialist residential property fund (Real Estate Investment Trust or “REIT”) listed on the Johannesburg Stock Exchange (JSE).

The entity was listed in 2016 as a R1.5 billion residential rental fund that delivers multifamily rental opportunities for families within the South African affordable housing market.

Since being listed seven years ago, the entity has experienced various milestones, including migrating from the AltX onto the Main Board of the JSE, in 2020.

As of 2023, Transcend Residential Property Fund is now a R2.5 billion fund that owns over 4 000 units in two provinces, with 80% of their business in Gauteng and 20% of the portfolio sitting in the Western Cape.

At the helm of the entity is CEO Myles Kritzinger, who expands upon their business model: ”When you look at the business specifically and what the investment thesis is, we provide rental accommodation to a market that rents for between R4 500 and about R8 000 as a monthly rental. In the South African context, we offer a high-demand asset class in terms of the target market.”

Sadly, there is a quality housing shortage in South Africa, so Transcend Residential Property Fund has firmly positioned itself in the low to affordable income bracket or population pool in order to make a difference for those without the means to rent or buy big.

Kritzinger continues: ”The business itself and where it was born comes out of the International Housing Solutions (“IHS”) stable. IHS is a private equity fund setup that was established back in 2008/2009 that deals specifically with delivery of affordable housing to the South African market. They have now expanded their operations into sub-Saharan Africa and even into East Africa, so that business has grown, but Transcend was a spin-off of their first South African based affordable housing fund which was established in around 2008; and took that remaining asset base and listed them on the exchange.”

The Transcend Residential Property Fund difference

As the value proposition of the entity is to provide quality affordable housing to the low to middle income bracket market, the aim is to ensure that tenants are afforded the opportunity to live comfortably and with access to a variety of social amenities.

Informal or inferior affordable housing is often available for the this housing market, but where Transcend Residential Property Fund look to differentiate themselves is with the quality of the property that they offer and housing opportunities—without pricing people out.

Kritzinger explains: ”This ‘quality’ extends to how the product is designed so that it is effectively and efficiently managed. A lot of focus has gone in over the years to delivering properties and opportunities to this market closer to the major metropoles; closer to transportation corridors, to places of work, and social amenities. This allows our tenant base to have access to facilities or opportunities that they wouldn’t previously have had if they were staying in conventional affordable township accommodation or periphery locations.

”What we’re looking to do is to bring the target market closer to places of work and better support them in terms of their socio-economic situation. We have a quality product in the right location, and years of experience and effort has gone into what the product entails, how it is designed, how is it built, and how we tie into delivering safe and secure lifestyle estates”

Key to the quality is ensuring that all of their assets are controlled, managed, and maintained to the very highest standards, ensuring that the quality never drops and tenants are housed within well-functioning, top-notch homes—something which Kritzinger believes is a big differentiator when you look at his entity relative to other competitors.

The future of the fund’s portfolio

In terms of growth, Kritzinger sees the future of the fund on two levels; the business itself, and multifamily residential rental as an asset class and the opportunity that sits underneath it within the broader market.

”At the moment, our growth is largely a function of equity and the capital markets. We are currently not going through an aggressive growth phase, but what we are doing is recycling capital through our balance sheet and re-positioning the business to be opportunistic around what might be the next stage or whatever next opportunity we transition into,” he avers.

Transcend Residential Property Fund hasn’t managed to go out into the market and acquire new assets, as that is largely driven by the lack of supportive capital and equity in the listed real estate sector at present and the funding.

In fact, they are actually going through a delisting, which Kritzinger explains: ”I think where things have ended is that to be listed in the current circumstance you are not necessarily getting rewarded for good performance and the benefit of being listed at the moment doesn’t make sense relative to the cost of compliance. So what we are going to do is look to delist by the end of the year and take Transcend private, where it will then be a subsidiary of Emira, who is our largest shareholder at the moment.”

However, given the underserviced and undersupplied market in South Africa where the demand for appropriate and quality housing cannot be ignored, Kritzinger believes that there is a “massive opportunity for growth for the asset class, provided that capital providers and allocators can better understand what residential offers as a defensive investment and from a consistency of return perspective. However, the frameworks and the policies available to us from a national government and even from a local government perspective can and need to be implemented and executed on properly.”

A leader’s perspective

Depending on who you speak to, some will say that South Africa has a leadership problem, with said leaders not strong or decisive enough to carry the country forward.

Kritzinger, however, doesn’t entirely agree with that narrative.

For him, the quality of leadership in the South Africa business environment is evident, however it is rather the way we implement ideas and go about bringing them to table that needs thought.

”I do think that in general we have the leadership capability, I just think what often gets missed are the platforms under which the leadership of both the public and private sector are talking or where that discussion point actually happens—and whether it is happening in a constructive way,” he insists.

”I think that there are people who are willing and who do want South Africa to succeed and who are committed, I just think it’s about whether we are having the right conversation through the right channels to make sure that we are actually succeeding in terms of creating value in the country or succeeding as to what it is that our objectives are.”

In terms of his own leadership style, Kritzinger says that he is a leader who is very much about inclusion and collaboration, with the involvement of others and understanding their perspective critical in etching a way forward on certain initiatives, ideas, and strategies.

”For me it’s very much about involving my team in the day-to-day context of the business, making sure that there is transparency and communication in terms of the leadership of the company. That’s passed down to everyone that’s involved,” he explains.

From CFO to CEO

After a thoroughly successful three years as Transcend Residential Property Fund’s Chief Financial Officer (CFO), Kritzinger was promoted to the position of Chief Executive Officer (CEO) in 2021.

The University of Johannesburg graduate believes that his role as CFO softened his transition into the CEO’s seat, which subsequently allowed him to hit the ground running following the hard COVID-19 lockdowns.

”What being the CFO and then CEO helped me with was to understand the nuts and bolts of the business, see the company from top to bottom very quickly, and see how that manifested in terms of financial performance and results. I think as soon as you understand the viability of a business, then you are better equipped and better positioned to make decisions for the company at the end of the day,” Kritzinger explains.

”Stepping into the shoes of the CEO, you know, there are broader issues which take priority, but I think it sets a strong backbone to my understanding of what it is that we did as a company, where the pressure points obviously sat from a commercial standpoint, and where the opportunities lay in terms of unlocking value.”

When Kritzinger was appointed as CEO, he was just 37 years of age.

For many, that may seem like a very young age for a CEO, as the position requires a lot of experience and a degree of maturity that many don’t have in their 30s.

While Kritzinger understands that, what he has done so far must be commended, as he has fully entrenched himself in the role and learned the intricacies of the position on the job.

He says: ”As much as you can feel that you are right for the position, there is a lot of maturity that comes with that position as well, and maturity is something that you only learn over time. Although I have had certain other experiences which led up to my appointment, something that I had to learn as a CEO is that there is a lot more that comes with the job than what I had previously experienced in my fifteen-year career. It is how you deal with those pressures or situations and how you mature from that which I suppose better equips you to deal with the responsibilities of being a CEO.”

What has certainly helped Kritzinger adjust to life as a CEO has been the people around him, something which he considers himself to be extremely lucky to have.

From mentors to sounding boards, each and every individual who has helped shape him has served as a catalyst to where he is today.

”They have helped me to become more patient with my expectations or what it is that I am aiming to achieve with the business. Business is all about people at the end of the day and how we connect with people to move forward together, so that’s been one of the key learnings; to ensure that I can successfully carry out my job and see the success of our company,” he adds.

Dealing with the pressure

Being a CEO is a high pressure job, there is no denying that fact. However, it boils down to how you are able to deal with that pressure mentally which sets the good CEOs apart from the great CEOs.

In 2023—and especially after the pandemic—mental health has become an important talking point for everyone across the working and social spectrum. For Kritzinger, he understands that balance is required to be able to perform at the top of your game, as burning out mentally and physically does nothing for the performance of the business.

”In terms of running a high stress job, you do need that safe place that you can go back to in order to just reset, refresh, and put things into perspective. For me, the work-life balance is critical and what that means is that I try to live as consciously as possible. I’ve got a young family at the moment who are a huge priority in my life and making sure that I spend time with them is key. Keeping fit and staying healthy is often a way to get release from work pressures, so I do like to spend quite a bit of time outdoors and exercising,” Kritzinger, who took part in the grueling Cape Epic in 2023, insists.

”I am fortunate and lucky enough that I have got a lot of love and support from my family and friends to make sure that when I go out there every day, I am the best version of me that I possibly can be.”

A parting message

In closing, Kritzinger is calling on both the public and private sectors to start investing more in multifamily residential housing.

While this may perhaps come across as a selfish plea, given the business that he runs, the reality is that Kritzinger believes it is all our social duty to ensure that those who are not as well off as others are given the chance to live a comfortable life in a place that they can call home.

”I think there is a unique opportunity in South Africa where if we organise ourselves better as the private and public sectors, we can actually deal with the current housing crisis. At a national level, there’s a huge social requirement for us to deliver quality housing to this underserved market, so I think it fulfils a massive need that isn’t actually being dealt with appropriately,” he concludes.

”I often liken it to the energy crisis in South Africa. All of a sudden things were mobilised relatively fast and it was a priority of the government, while the reality is that we also have a housing crisis in South Africa which has been around for a lot longer. A partnership between the private and public sectors can unlock opportunities in a more effective and efficient way.”

And we too hope this becomes the case going forward.

By Editor