Materiality summary

A long boom and lax legislation has offered free reign for property companies, but local uncertainties and tighter regulation in the UK and Europe demanding higher standards of governance and ethical business practices:

• Solid, reliable and responsible deal-making requires effective and balanced boards, with remuneration and incentives aligned to minority shareholder interests
• Strong leaders present key man risk, demanding leadership selection and preparation by property companies
• Moral DNA of the organisation, driven by leadership
• Corrupt practices, especially in vulnerable geographies, as well anti-competitive behaviour, potentially excluding boutique stores from large malls
• Treatment of customers and customer satisfaction to retain tenants and attract mall traffic in the retail environment
• Green building practices, particularly relating to energy conservation, water efficiency and natural conditioning of the work/shop environment

Results

• Dual listed property companies exhibited a far more mature approach to governance than SA companies, with the Resilient stable performing by far the worst
• The potential to collude with large, national retailers, thus crowding out smaller, local shopkeepers in retail centres is the most common vulnerability, especially for SA companies
• Cross holdings and common directorships threatening board independence and alignment with shareholders’ interests
• Growthpoint is the only company to effectively promote its green building proposition, substantiated by its involvement with the GBCSA. Most other companies either pay lip-service to the issue
• Aside from Hammerson and Intu Prop, who provided excellent insight into shopping trends, most companies show little evidence of engagement with customers
• UK companies outshine SA companies in their engagement with local authorities

See the executive summary for individual company scores and materiality weightings. Buy our full report for detailed analysis and substantiation of our analysis.