Well-priced but mediocre portfolio
THERE’S NOTHING particularly sexy about the R1,77bn property portfolio Investec is bringing to the JSE, but there are reasons enough why the new real estate listing is worth a punt. For starters, the fund is backed by an astute management team likely to unlock plenty of value for shareholders over the next few years. Investec Property Fund’s two Sams – CEO Sam Leon and executive chairman Sam Hackner – have built a formidable property development, trading and acquisition track record over the past 20 years.
The two industry veterans were involved (among others) in the creation of Growthpoint Properties, Investec’s previous foray into South Africa’s listed property sector. Growthpoint, the only real estate counter yet to make its debut on the JSE’s Top 40 index, has over the past 10 years seen its portfolio balloon from all of nine buildings worth R100m to more than 450 properties worth R41bn, including its newly acquired 50% stake in Cape Town’s V&A Waterfront.
Investec Property Fund is also well priced compared with the rest of the sector. It offers investors a forward income yield of around 9,5%, against the sector average of 8,6%. The initial portfolio comprises 29 properties.
It’s also comforting that management is putting a significant amount of their personal wealth into the vehicle. “Clearly, that helps align the interests of management to that of shareholders and allays the concerns we typically have about externally versus internally managed funds,” says Kundayi Munzara, a former Investec Property analyst and currently a director at property asset managers Sesfikile Capital.
Although the quality of Investec’s property portfolio is below the sector average in Sesfikile’s view, Munzara says the counter is fairly priced. “On a comparative view the listing is coming in cheaper than some of the existing property stocks and we rate the management team higher than