Investec Australia delivers results that are ahead of expectations

INVESTEC Australia Property Fund (IAP) has said that it was not yet possible to assess the impact of the coronavirus pandemic on its operations for the 2021 financial year, but its balance sheet remained.

Chief executive Graeme Katz said the fund delivered results that were ahead of expectations for the year to end March.

“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,” Katz said.

IAP listed on the Australia Stock Exchange a year ago, raising A$161 million (R1.94 billion).

An oversubscribed institutional placement raised A$84m last September.

Three industrial properties were acquired for $81m (R1.5bn) in October, while 757 Ann Street was sold for $94m in April 2020, 11 percent above book value.

Katz said IAP’s defensiveness arose from holding office and industrial properties, while most of its tenants were in government, listed or multinationals – these tenants were less likely to default on their rent.

Revenue increased 12.9 percent to A$101.1m from A$89.5m, while operating profit was higher by A$1.8m to A$66.1m. However, the distribution per unit fell from 1.14 cents per unit to A$9.09 cents per unit.

The group said it remained well positioned to take advantage of acquisition opportunities.

A number of initiatives to strengthen the balance sheet were undertaken. Following the capital raising at the ASX listing, conducive market conditions in October last year saw it raise further capital off the back of asset acquisitions.

Shortly after, the sale of the 757 Ann Street property completed post the reporting date on April 1, with the proceeds being used to reduce debt.

In late 2019 the fund secured $150m (R2.76bn) of 10-year fixed rate debt from a large US financial institution, and post the reporting date in early April this year restructured the debt facilities held with its Australian-based banks.

As a result, gearing reduced from 37.4 percent to 22.2 percent, the weighted average debt expiry has been extended from 3.6 years to 7.4 years.

“We also have $17m of cash on the balance sheet and $67m of undrawn debt. We believe the fund is well positioned to manage the challenges in the coming year and to take advantage of future acquisition opportunities,” Katz said.

The fund’s property portfolio performed well over the past year with occupancy remaining high. “The portfolio is focused on metropolitan office and industrial properties, which we believe will be relatively resilient given the current market uncertainties, he said.

Some tenants had 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. It is too early to assess the full impact of this evolving situation,” he said.

The portfolio now comprises 30 properties valued at $1.09bn. A rigorous process was undertaken to determine fair value of the properties, taking into account the known and anticipated impacts of the Covid-19 pandemic. This has resulted in an underlying net asset value of $1.32 per unit, up from $1.30 per unit during the period.

IAP shares rose 1.33 percent on the JSE yesterday to close at R12.97.