Investec Australia Property Fund in good health
Investec Australia Property Fund (IAPF) has rewarded its investors with a dividend for its 2020 financial year while its SA competitors struggle to generate returns.
The company has decreased its debt levels substantially and has found that while the coronavirus pandemic has placed pressure on some tenants’ abilities to pay rent, the effects were not as severe as in some other countries, given that Australia’s lockdown was less severe than that in SA and some developed countries.
IAPF, which is partly owned by Investec Property Fund, declared a final dividend for the six months to March of A4.30c per share, bringing the full-year annualised dividend to A8.88c per share, in line with guidance given to the market.
“The fund has delivered a financial result ahead of expectations. However, as we enter a period of uncertainty associated with the Covid-19 pandemic, we have determined to distribute the amount previously advised to the market, which we believe demonstrates prudent cash management,” said CEO Graeme Katz.
IAPF’s portfolio comprises 30 properties valued at A$1.09bn. Katz said that during the period under review, the fund implemented a number of initiatives designed to strengthen its balance sheet. The company listed on the main board of the Australian Stock Exchange (ASX) during the reporting period, where it also raised funds.
“Following the successful capital raising at the time of the ASX listing, the fund took advantage of conducive market conditions in October last year to raise further capital off the back of asset acquisitions,” Katz said.
IAPF also sold 757 Ann Street in Brisbane for A$94m, an 11% premium to book value. The sale was completed post the reporting date on April 1 2020, with the proceeds used to reduce debt.
In late 2019, the fund secured A$150m of 10-year fixed-rate debt from a large US financial institution, and post the reporting date in early April 2020 restructured the debt facilities held with its Australian-based banks. This decreased IAPF’s loan-to-value ratio from 37.4% to 22.2%.
Katz said IAPF had been able to stave off much of the negative effects of Covid-19. “The significant majority of the fund’s tenants are government, listed or multinationals, with very limited exposure to tenants in the retail and consumer discretionary sectors,” he said.
“There is no doubt that some tenants have been financially impacted by the Covid-19 pandemic. We are assessing requests for rental support on a case-by-case basis [with a] view to agreeing commercially sensible outcomes with tenants where possible,” Katz said.
The company said it was too early to assess the full effect of Covid-19 on the tenant base and fund, but “the intention is to approach discussions with tenants with a view to preserving the long-term sustainability of the fund’s income”.
Meanwhile, Investec Property Fund said it would continue to offer rental relief to its tenants where needed, with a focus on small and medium enterprises. It also said struggling retailer Edcon, which entered business rescue last week, only constituted 0.6% of its annual group revenue.