Pareto Limited

As its short history of the past 10 years shows, property loan stock company Pareto was born to be a trailblazer.

Back in 1998 when Pareto was established as a separate corporate entity, not many people in SA thought much about focused property funds. The idea of a focused retail property fund appeared unsustainable.

With retail property assets bundled out of the Eskom Pension & Provident Fund (EPPF), Pareto has endured through the scepticism of its early years and flourished to become one of the largest property funds in the country.

In later years EPPF was joined by the Public Investment Corp (PIC) as a 40% shareholder in Pareto, which came to prove the attractiveness of the Pareto innovation.

Starting with assets valued at R2,8bn, Pareto has grown by building a portfolio of large shopping centres that are now valued at about R10bn.

Pioneers - Cresta Mall is one of the major centres in which the company has a stake in

Pareto was born when SA's transition to democracy was only three years old. Changes in the socioeconomic landscape were coming thick and fast, leaving many establishments quite disorientated. Alongside the political winds of change, came new challenges and opportunities in the commercial property arena. The retirement fund management industry was not spared. The move from a defined benefits structure to defined contribution was beckoning.

The birth of Pareto represented a superior response to the changing landscape. It is all due to an extraordinary vision that was realised by a group of executives who were housed within the then property division of the Eskom Pension Fund.

With Pareto, they blazed the trail for the country's second wave of unitisation of property assets, sector-focused property funds and the emergence of super-large shopping centres.

Blessed with a strong foresighted management and a good eye for partnerships, Pareto has been able to take advantage of SA's changing economic landscape to deliver a dynamic portfolio.

On top of superior returns, Pareto has proved to be an excellent idea.

It created a specialised pool of retail-focused skills, which would contribute to the development of the entire retail property industry.

As a property loan stock company, Pareto would deliver a number of real economic benefits. It meant that a couple of separately held assets would be unitised into a single powerful entity that could be leveraged for growth.

Unitisation also promised liquidity. Pareto assumed a legal structure that is similar to the JSE-listed property loan stock companies whose capital structure is made up of a combination of equity and debt security.

Since the establishment of Pareto in 1998, the bulk of singly held properties have moved into unitised structures, which were listed on the property sector of the JSE and have produced wonderful returns.

Proving the popularity of these funds is the growth in the JSE's property sector. The sector has grown from a market cap of less than R10bn in 2000 to R100bn last year.

The appointment of Alex Phakathi as CEO in 2004 placed Pareto at the forefront of black economic empowerment (BEE). It was the beginning of a remarkable journey that has transformed the property fund into a champion of BEE.

Strong winds of change are once more blowing through Pareto. Phakathi is overseeing a large investment drive that will boost the asset base by more than 50% in the next few years. EPPF is weighing its options.

Every savvy property practitioner will be watching developments at Pareto with interest. They will be waiting for the day Pareto's journey is completed with a debut on the JSE.

Pareto chief financial officer Nomzamo Radebe says the matter of a listing features constantly in the group's strategic deliberations. Meanwhile, though, stakeholders are still comfortable with the status quo.

By Sibonelo Radebe, Financial Mail