Investec Property Fund CEO Nick Riley
Investec Property Fund (IPF) has acquired a portfolio of 22 properties for R826 million from leading real estate group Griffin Holdings at an attractive yield of 9.3% based on contractual income (8.6% excluding top slice rentals). The acquisition introduces a quality portfolio of income producing properties into the Fund’s asset base and boosts assets to R9.5 billion, just shy of the R10 billion target set out at listing.
Investec Property Fund CEO Nick Riley said: “The acquisition is consistent with the Fund’s growth and investment strategy of building a quality portfolio by investing in well-priced income producing properties that optimise capital and income returns over the medium to long-term for shareholders.
“Having recently delivered financial results that outperformed market expectations, we have essentially met our objective of growing our asset base to R10 billion within five years, but not at the expense of quality.”
The portfolio comprises 18 industrial properties, two motor dealerships, and two office properties with contractual, above inflation, in-force escalations of 8.6%, and a 3.7 year weighted average lease expiry for the industrial portfolio which accounts for 71% of the portfolio value. The portfolio has minimal vacancies of less than 1% which are covered by a rental guarantee.
Included in the industrial portfolio is the Kevro and Rohlig Grindrod properties situated in Longmeadow Business Estate which together account for approximately 25% of the portfolio. These prime properties offer exposure onto the N3 highway and provide tenants with prime signage visibility onto one of South Africa’s busiest highways.
As part of the acquisition the Fund has been granted options to acquire certain of the remaining properties owned by Griffin at an agreed forward yield, providing an attractive pipeline of quality properties. In addition Griffin has granted the Fund right of first refusal over its remaining properties and developments, comprising approximately 156,184m2 of Gross Lettable Area (GLA).
Highlighting Griffin’s longstanding relationship with Investec, Riley said: “The transaction demonstrates the benefit of the Fund’s association with the bank, a key advantage which gives us access to quality properties and an excellent pipeline in a very competitive market.”
The purchase consideration will be settled in cash and will be funded either through debt and/or equity. IPF is conservatively geared with a gearing ratio of 23.6% and has significant headroom with R2.6bn of funding facilities in place and further appetite from funding partners.
The acquisition is subject to Competition Commission approval.