Investec Property Fund (IPF) is finding success in Europe while a number of its JSE-listed peers struggle to compete there.

IPF said on Wednesday it had been fortunate in Europe, having timed its entry well and managing to partner with strong management teams. Its new European investment platform achieved double-digit returns in euros, while its established Australian and UK investments have also delivered similar growth.

Other SA property companies, including RDI Reit and Rebosis, which have invested in the UK and Germany have battled to excel abroad. RDI sold down its German assets this year and has also exited high street shopping assets in the UK in a bid to boost returns. Rebosis has written off its investment in UK mall owner New Frontier Properties.   

IPF, which has amassed R2.5bn worth of assets in developed countries in Europe and about R735m in a UK fund over the past year and a half, boosting its overall asset base to nearly R22bn, reported dividend growth of 3.1% in the six months to September.

Its share price has responded well, having increased 11.71% year to date. It achieved a total return of 36.84% in the first 10 months of the year. This is while the SA listed property index has returned a total 3.25% over that period, according to Catalyst Fund Managers. 

IPF has invested in a European logistics portfolio that owns assets in Germany, France, the Netherlands, Spain, Italy and Poland. The investment return on this initial portfolio was 12.3% in rand and the capital growth on the investment has been 20.2% in euros and 8.2% in the reporting period. 

IPF has also invested in a portfolio of light industrial properties.  This portfolio is expected to generate a euro return of 9.5% once leveraged. It will pay a maiden dividend in December. Its R867m stake in Investec Australia Property Fund and its R735m take in a UK fund returned 27.4% and close to 10%, respectively.

IPF’s dividend grew 3.1% to 70.9c per share from 68.8c. This is while some other property companies have seen their dividends flat-line or shrink this reporting season.

Meanwhile, IPF’s co-CEOs Andrew Wooler and Darryl Mayers said the group’s SA assets have been “tenacious in a blood bath of a market”.  

The group’s SA portfolio saw like-for-like net property income growth of 1.3%, which was subdued by a rise in bad debts and negative rental reversions. The SA property portfolio of R17.3bn accounts for 80% of the group’s balance sheet. The fund had seen a marked increase in bad debts arising from business failures and liquidations.

The local portfolio, worth R17.3bn, achieved net property income growth of 1.3%.

IPF’s gearing at 26.8% is well below the 35%-40% target of most fund managers covering the sector, as the company is not under pressure to let go of assets at fire sale prices. IPF is on track to grow its dividend by between 3% and 5% for the full year to March, likely beating consumer price inflation if it meets the higher end of its guidance.  

Wooler said IPF has R500m worth of assets identified for sale in SA and that IPF will continue to buy retail, office and industrial assets in the country and it will not rule out making takeover attempts of other JSE-listed property funds.

With Karl Gernetzky


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