IPF to bolster its logistics assets

• SA portfolio expected to improve

The Investec Property Fund (IPF) decision to invest in European logistics properties is a buffer against struggles it is facing in SA. Co-CEO Andrew Wooler said its pan-European logistics assets have been resilient and benefited from increased demand for logistics real estate.

The Investec Property Fund (IPF) decision to invest in European logistics properties was a buffer against struggles it is facing in SA, its CEOs said on Tuesday.

The company, which released a trading update for the six months to September, said the biggest threat to SA commercial landlords is companies going out of business in the Covid-19 fallout.

SA accounts for 64% of IPF s

’

portfolio, Europe for 32% and the UK for 4%. IPF s total property

’

portfolio is worth about R20bn.

IPF has spent the past few months selling certain SA assets and its stake in Investec Australia Property Fund, saying that most of the capital it will spend in the foreseeable future will be on assets for its European platforms. It has raised R2.5bn through asset sales.

Co-CEO Andrew Wooler said the pan-European logistics assets were resilient during the period and benefited from increased demand for logistics real estate. It is well positioned to gain from longer-term structural drivers due to Covid-19 as retailers hold more stock in warehouses in case there are second lockdowns in Germany, the Netherlands and elsewhere. We have had a very strong “

letting performance. As much as 97% of space that was set to expire in the first half of the financial year 2021 was renewed or re-let at a 10% positive reversion,” he said.

Co-CEO Darryl Mayers said it has been very hard to lease in

“

SA during the downtime ”.

I think our team has man“

aged the local portfolio in an exemplary fashion, but it s very

’

hard out here. Covid-19 and the lockdown have hit SA far harder than they have many other countries,” Mayers said.

In the past few months IPF lost rental income from a number of tenants, many of which are small stores.

It s been very tough and we “’ have tried to help tenants wherever we could. Edcon is the well-documented retail business rescue, but we made a plan for Edcon and space reductions. We are concerned about “small businesses and how they will perform next year in a very weak SA environment with a growing rate of unemployment,” Mayers said.

Nesi Chetty, senior fund manager at Stanlib, said IPF had a clear focus over the past six months to improve its balance sheet and to streamline its portfolio. The sale of the remaining

“

Investec Australia business and SA asset disposals of just under R1bn have all helped. The refinancing of debt within their panEuropean logistics platform is also expected to be completed during October,” he said.

Investec Property Fund continues to be well capitalised during this tough operating environment with interest and LTV [loan-to-value] debt covenants well managed,” he said.

Wooler said the company expects an improvement in its SA portfolio and offshore logistics assets into the second half of its March financial year as lockdown restrictions have eased and new lettings improve across the portfolio. He said the LTV in the fund increased to 43% but the management is focused on lowering it to about 38% by the end of the financial year.

Chetty said IPF had spent a few years making its portfolio more defensive.

A total 50% of its total balance sheet comprises logistics and warehouses, which held up well during the start of the pandemic. A quarter of assets by value are now concentrated in retail. They have done well to

“

rebalance the portfolio,” he said. Mayers said IPF s malls that

’

were hardest hit by the pandemic are The Firs, Balfour Park and Design Quarter. The group will soon announce an initiative to improve Design Quarter. Chetty said that IPF s results

’

are the first in the listed sector to have experienced the full impact of lockdown restrictions in SA and abroad.

Distributable earnings would have been affected by lower rentals due to concessions and rising bad debt provisions in SA, he said.