Investec Property Fund (IPF) has decreased its exposure to the volatile SA commercial real estate market with the sale of two assets, saying any acquisitions in 2020 will be made in Western Europe.

The group’s co-CEO, Andrew Wooler, said IPF needed to take advantage of opportunities its Europe-based team had found or it would miss out on double-digit returns. In November 2019, after the release of financial results for the six months to September 2019, Wooler said IPF would sell those local assets that were not expected to increase in price and that in 2020 all acquisitions would be offshore.

The group said on Monday it would sell its shareholdings in the Musina Mall in Limpopo and Boitekong Mall in Rustenburg for R727m, at a discount to book value of 3%. Book value refers to the value of an asset on a company’s balance sheet.

Wooler said IPF had been fortunate in Europe, having timed its entry well. An established team in Europe from the larger Investec group had been looking at opportunities in the region before IPF’s West European business, Investec Property Fund Offshore Investments, was launched.

IPF, which was listed by Investec in 2011, first invested through this business in 2018 when it bought a 42.9% interest in a portfolio of 22 logistics properties in Europe by way of equity investment, for R1.13bn. Subsequent to this, it co-invested in other European assets with its management partners.  

By the end of 2019, IPF had amassed R2.5bn worth of assets in developed countries in Europe and about R735m in a UK fund. It also owned a stake in Investec Australia Property Fund, worth about R1.9bn. Its SA assets were worth R16.7bn, or 77% of its portfolio.

Other SA property companies, including Rebosis and RDI Reit, that have invested in the UK and Germany have battled to excel in Western Europe. RDI reduced its German assets in 2020 and exited high-street shopping assets in the UK, shifting its focus to other asset classes. Rebosis has written off its investment in UK mall owner New Frontier Properties. Intu Properties is selling some of its Spanish coastal retail centres and its British malls, to lower its relative debt levels.   

Wooler said IPF did not want to appear anti-SA, but it needed to use capital elsewhere.

“SA still dominates, but as stated at our results [briefing], we are focused [on] recycling capital on a risk-adjusted basis to ensure sustainable shareholder total returns,” he said. Wooler said Europe had been a great success for IPF, which was led by property fundamentals and an on-the-ground management team.

“The strategy has proved to be successful, not chasing yield but rather understanding the underlying assets and using asset management skills to unlock value for shareholders in a market that is showing very strong rental prospects,” he said. The transactions are subject to approval from the authorities and are expected to be concluded in March.

Ahmed Motara, an analyst at Stanlib, said given the high forward yield on the stock, the company had chosen to use an optimal capital strategy to buy its offshore assets, which would potentially provide incremental growth for its earnings.

The fund’s share price was flat at R13.89 on Monday.



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