IPF lifts annual dividend 8.5%
• Investec Property Fund chief acknowledges some weaknesses within results, but says these are under control
Investec Property Fund (IPF) is making its first foray in Europe to diversify its portfolio against risks in a South African market that is recovering very slowly.
Investec Property Fund (IPF) is making its first foray into Europe to diversify its portfolio against risks in a slowly recovering South African market.
The fund acquired a 42.9% interest in a portfolio of 22 logistics properties located across Europe for an initial equity investment, inclusive of all transaction costs, of €74.2m.
IPF has effectively invested into a platform providing access to core logistics markets across Europe, with the initial portfolio located across Germany, France, Netherlands, Spain, Italy and Poland. IPF’s initial investment yield in the acquisition is about 10.5%.
The real estate investment trust (Reit), which owns assets worth R19.2bn, grew its total dividend 8.5% to 138.53c a share in the financial year to March, results showed on Tuesday.
This was well above those of many other South African Reits, which on average grew their dividends 3%-5% in the current reporting season.
An interim dividend of 70.16c per share for the six months ended March 2018 was included in the total dividend.
This interim dividend was boosted by a one-off antecedent dividend received from Investec Australia Property Fund.
On a normalised basis, excluding this antecedent dividend, the year-on-year total dividend per share growth was 6.1%.
IPF delivered a total return of 21.5% during the financial year. Since listing in April 2011, it has managed a total return of 202%, outperforming its peer group, CEO Nick Riley said.
Evan Robins, a portfolio manager at Old Mutual Investment Group, said “Investec Property Fund’s results were as expected and a decent enough result in this environment.”
He went on: “Tough conditions are evident as many operational metrics were weak.
“The offshore deal will somewhat compensate for subdued domestic income growth expectations.”
Riley said that there were some weaknesses within IPF’s results, but these were under control and he was confident that the group could achieve strong core dividend growth of 6.5%-7.5% in the next financial period. Due to the lower revenue growth and increases in expenses associated with letting activity, municipal rates and other costs focused on client retention, the fund’s cost-toincome ratio deteriorated from 15.2% to 16.8%.
Group vacancies climbed significantly from 1.4% last year to 4.8%, or 4% if the space earmarked for redevelopment was excluded.
IPF was looking to manage its assets more effectively in a slow-growth South African economy. “We remain focused on revenue security, delivery of differentiated service to clients and optimising balance sheet metrics, while growing our portfolio through measured expansion both locally and internationally,” he said.
In SA, the Edcon group has 23 of its brands across 10 of IPF’s retail properties and has said it is looking to occupy less space and may have to close stores.
IPF said that risks related to this rationalisation were manageable, with Edcon rent accounting for less than 2% of total group revenue.