When Investec Property Fund listed in April 2011, management, which included industry veterans Sam Hackner and Sam Leon, had ambitions of growing the fund to R10 billion from its then R1.7 billion.
Four years later, it appears that the property fund is well on its way to reaching the set out target.
Investec Property Fund, which was born out of investment bank Investec, has been active on the deal-making front.
Just for the year ended March 31, it concluded acquisitions worth R1.9 billion – of which R1.1 billion are from Investec Property, a subsidiary of Investec Limited. It does not end there for the fund with a market capitalisation of R7.5 billion, as it announced more acquisitions.
Its most recent deal involves 22 properties, of largely industrial assets, acquired from real estate group Griffin Holdings to the tune of R826 million.
The portfolio includes 18 industrial properties in Gauteng and the Western Cape, of which two are motor dealerships and the remaining two are office properties. The deal will see Investec Property Fund grow its property portfolio from the current R8.7 billion to R9.5 billion.
On a four year view, the fund has managed to grow its assets from 29 upon listing to 102 with the Griffin transaction.
The fund’s association with Investec bank has put it in good stead, as the bank on Thursday announced an equity raise of R561 million to fund Investec Property Funds latest acquisition. It placed R35.8 million of its Investec Property Fund shares at R15.70 per share, which will see its shareholding into the fund reduce from 35% to about 26%.
Despite its share price drop to R13 in February 2014, from highs of R18 in September 2012, the fund has been recovering to levels of R15.78 at Thursday’s negative close. Old Mutual Investment senior portfolio manager Evan Robins said Investec Property Fund has provided a total return of 3% year-to-date (January to June 18) and has underperformed the FTSE/JSE South African listed property index, a measure of the sector’s performance, by 1.5%.
Recently appointed CEO of the fund Nick Riley, said the fund has debt facilities in place to fund the R265 million difference in the value of the acquisition relative to the capital raised.
Now that the fund is near its R10 billion target, it has more ambitions. This includes growing the fund to R20 billion in the next three to four years.
“We have an attractive pipeline we are looking at in the near term and over the next couple of years we would like to continue that growth. If you look at the size of the portfolio, since listing we have delivered on our returns in distributions to shareholders and we did not scale up for the sake of scaling up,” Riley said.
In May, investors were rewarded as the fund increased its full-year distribution growth by 10.1% to 119.15 cents per share. The fund benefited from its offshore exposure into Investec Australia Property Fund in which it has an 18.6% shareholding valued at about R500 million. Its investment into the Australian fund equates to 6% of its asset base. Investec Australia Property Fund is inwardly listed on the JSE’s main board.
“We like the profile of Investec Australia. It is starting to hit the growth curve from an asset point of view. The quality of the portfolio is rock solid with good quality tenants and location,” Riley added.
He added that provided the positive fundamentals of the Australia fund continues, Investec Property Fund will continue with its investment. “We are very comfortable with the investment to date and we will judge each investment merit at any particular point in time,” Riley said.
Industry players have commended the fund for its management team. Investec Property Fund recently announced changes in its leadership, as Leon stepped down as CEO into a non-executive deputy chairman role, making way for Riley to be at the helm of the fund.
Robins said Investec Property has built a portfolio that contains “many assets with long-leases to good quality corporates”. Some of its assets include The Firs and Balfour Park Shopping Centre in Johannesburg. Its portfolio has a weighted average lease expiry of 4.4 years and a vacancy level of 2.8%.