Investec Property Fund doubles offshore focus even as SA assets do well amid Covid-19
IPF has been able to offer tenants in financial distress, because of the pandemic, 100% rental relief for the period of the lockdown
Investec Property Fund (IPF), which has recently been increasing its exposure to warehousing and distribution centres, said these assets stand to benefit from increasing e-commerce as a result of the Covid-19 pandemic.
The lockdown due to Covid-19 is expected to spark demand in online shopping as consumers stay home rather than go to the shops.
IPF’s co-CEO Andrew Wooler said on Wednesday that he is confident management’s restructuring of the fund over the past three-and-a-half years will continue to pay off in 2020.
“We are quietly confident about how IPF can do during this volatile period and afterwards. We haven’t turned our backs on SA, but over the past few years we have invested in a European property platform that is offering us great returns. There is still a lot of scope in terms of rental growth for the industrial assets in this platform,” he said, following the release of financial results for the year to end-March.
The group almost doubled its offshore exposure during the reporting period to 35%, from 15.2%, saying that its new stakes in warehouse and other logistics assets could benefit as the coronavirus pandemic shakes up global supply chains.
During the year, IPF, through its wholly owned subsidiary Investec Property Fund Offshore Investments (IPFO), increased its interest in its “pan-European logistics platform” (PEL) from 42.9% to 75% for an additional equity investment of €191m (R3.8bn).
“While lockdowns have been in place, tenants have had to keep stock for longer. We are seeing increased demand for storage space throughout Western Europe,” Wooler said.
The industrial and logistics sector has shown itself to be the most resilient through the crisis and is also expected to benefit over the medium term as demand for warehousing and distribution assets improve, the group said.
IPF said industrial and logistics properties are being driven by an accelerated increase in e-commerce penetration rates “resulting from the lockdowns and supply chain reconfiguration to protect supply and stock, leading to a higher demand for storage and warehousing space”.
Co-CEO Darryl Mayers said IPF’s SA assets have also performed well in the reporting period, delivering net property income growth of 0.9%. The retail sector was the primary contributor to this growth, which Mayers said shows the quality of the fund’s tenant base in a time when retailers have been under significant pressure.
IPF has offered tenants in financial distress, because of the pandemic, 100% rental relief for the period of the lockdown.
An increase in business failures contributed to a constrained net property income growth, as did longer void periods and negative rental reversions across the portfolio.
Mayers said IPF performed “very strongly overall” in the year reporting period.
Earnings available for distribution of 75.7c per share were achieved compared with 73.5c per share in the comparable 2019 period. This represents 3% year-on-year growth. Together with the interim financial results, the fund delivered full-year earnings available for distribution of 146.6c per share compared with 142.3c per share for the year to March 2019, also resulting in growth of 3% for the year to end-March 2020.
IPF reported that profit after tax rose about 19% to R1.7bn. The fund deferred a decision on its final dividend, having paid out about R541m previously.
Meago Asset Managers listed property analyst Bongwa Mthembu said IPF’s management team has shown an ability to find value from its assets. “Management has shown that it is able to drive valuation unlock for shareholders through proactive asset management. The rental collection for April and May for the local portfolio has been above average despite economic strain stemming from the SA Covid-19 lockdown, which speaks to the quality and strong positioning of the local portfolio.”
IPF was down 11.36% to close at R7.80.
Update: May 20 2020
This article has been updated with comment and information throughout.