Investec Property Fund benefits from offshore focus


Investec Property Fund benefits from offshore focus

Published Date: 2020-05-21 | Source: Stephen Gunnion | Author: Stephen Gunnion

Investec Property Fund benefits from offshore focus

The property fund says its expansion into European logistics properties is timeous given the accelerated shift to online retail as a result of Covid-19.

Investec Property Fund (IPF) says it is holding off on paying a final dividend for now despite growing distributable income in line with guidance last year. The real estate investment trust says, to the extent permissible by JSE regulations, it wants to hold off on a payment until there's more certainty in the trading environment. Under JSE rules, REITs must pay at least 75% of the taxable earnings available for distribution out to investors as dividends.

The fund said a strong performance from its property portfolios outside SA offset a weaker performance in its home market in the year to end-March as it expanded its European platform to grow its offshore exposure above 20%. Increased deployment into its European and UK platforms drove an 11.5% increase in its net asset value over the period. The expansion of its initial investment into a pan-European portfolio of logistics properties appeared well timed, with logistics set to benefit from the accelerated move to online retail and a shift in global supply chains. It said this would lead to increased demand for good quality logistics space.

IPF said its balance sheet was underpinned by quality property investments and a very robust tenant base, with 88% of its tenants rated as investment grade or better. Retail property, which has been hardest bit by the pandemic, represented about a quarter of its balance sheet. In SA, 83% of its retail tenant base are national retailers. In the UK, where its portfolio is 66% weighted towards retail property, more than half is underpinned by large supermarket chains.

IPF grew second-half earnings available for distribution by 3% to 75.7 per share, taking full-year distributable earnings also 3% higher to 146.6c per share. While its gearing had increased to 47.5% due to its offshore expansion, it said it was expected to normalise to around 34%.

In February, IPF said it would spend €191 million to raise its ownership of the Pan European Logistics (PEL) property portfolio to around 75% from 42.9%. It also planned to consolidate two logistics properties in Belgium it bought for €70.4 million last December into the portfolio. In January, it sold its stakes in the Musina Mall in Limpopo and Boitekong Mall in Rustenburg for R727 million as part of the offshore diversification strategy.

The fund said rent collections had been strong across all its geographies. In SA, where it has the highest retail exposure, it collected 73% of April's rent, with the UK, Europe and Australia all recording over 87%. Collections for May were tracking ahead of April as a result of the loosening of lockdown regulations. The majority of rental relief had been provided to SMME tenants affected by Covid 19 and, to assist the government with its response, it had made four buildings from its portfolio available as quarantine or testing centres.

Its shares fell 11% to R7.80 yesterday.

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