Johannesburg - Listed Investec Property Fund (IPF) is set to almost double the value of its asset portfolio to R16.4 billion and aims to grow it further to R25bn in the next three years.
However, chief executive Nick Riley stressed yesterday that this growth depended on property availability and yields on acquisitions in excess of the fund’s cost of capital.
Riley said they would not grow the fund purely for scale and would only make acquisitions where they saw value.
He added that there was not a lot of value left in the market and there were significant headwinds locally and globally, but the fund was well positioned to be active in a downward facing market.
Acquisition run
The growth in the value of the fund will be driven by the acquisition announced in June of the Griffin industrial property portfolio, comprising 22 properties, for a total of R826 million and subsequent acquisition of the Zenprop portfolio of 26 properties for R7.1bn.
Riley said there was a lot of focus in other funds in the short term and the Zenprop acquisition was contrary to this because the deal resulted in dilution in the short term but would stand the fund in good stead in the long term.
Riley added: “Since listing in 2011, the fund has grown its property portfolio over nine times with properties that maintain or enhance the quality of the portfolio.
“The latest acquisitions will not only double the size of the fund, thereby improving scale and liquidity, but also enhance the quality of the existing portfolio, allowing us to offer best of breed product to existing and prospective tenants in a competitively bid and challenging operating environment.”
IPF yesterday reported a 9.1 percent growth in dividends a share to 59.63c in the six months to September.
Australian growth
This was driven by portfolio net property income growth of 8.8 percent, an accretive contribution from the R1.9bn of acquisitions made in the 2015 financial year and 9.4 percent growth in distribution from the investment in Investec Australia Property Fund (IAPF).
IPF’s 18.6 percent investment in the IAPF is valued at R500m and it accounts for 5.7 percent of its portfolio.
Riley said they would look to increase their stake in IAPF over time.
“Out of all the international markets, we like Australia. It has attractive direct property yields,” he said.
IPF maintained the vacancy rate of its portfolio at 2.8 percent, which is one of the lowest in the sector, and had contractual escalations of 8.1 percent.
Vacancies stable
Riley said the fund delivered a solid performance despite an uncertain economic outlook, highly competitive landscape and upward pressure on various operating costs.
“The fact that our vacancy remained flat from the prior period… and positive reversions were achieved across all sectors on the 62 000m2 renewed or re-let space demonstrates the benefits of sticking to our strategy of investing in quality income-generating properties. This consistency helps provide visibility and sustainability of earnings and capital growth over the long term to our investors,” he said.
IPF shareholders approved the Zenprop transaction last month, which is still subject to competition authority approval.
IPF shares rose 2.5 percent yesterday to close at R14.95.
BUSINESS REPORT