Investec Property Fund’s PEL platform reports consistent performance

Head of Investec Property Fund South Africa trading and development portfolio, Darryl Mayers.
Investec Property Fund joint-CEO, Darryl Mayers.

Investec Property Fund expects its H1FY22 distributable income per share to be up by 10% – 12% (51.70 – 52.50 cents per share) year-on-year (y/y).

The REIT’s pre-close trading update for the six months ending 30th of September 2021 reflected balance sheet strength maintained with gearing at similar levels to yearend of around 38%, compared to March 2021’s 38.3%.

The further deleveraging of its SA balance sheet and restructuring of swaps has resulted in lower cost of debt with significant savings in finance costs over the half-year.

With total debt of R1.8 billion maturing over the next twelve months and R2.0 billion of unutilised facilities, the fund can settle these upcoming maturities should it choose to do so.

84% of its interest rate risk is currently hedged (March 2021: 83%) with weighted average swap maturity of 3.3 years (March 2021: 3.5 years).

South Africa:

Representing 56% of its balance sheet, the REIT’s South African portfolio reported an improvement in base net property income of 9% – 11% on a like-for-like basis (September 2020: -24.4%).

Its operational performance stabilised, resulting in strong leasing activity with a reduction in vacancies to 9.2% (March 2021: 11.4%). Its vacancies are expected to trend downward even further in H2, and the company is on track to achieve its single-digit vacancy target.

Investec Property Fund successfully renewed (or re-let) 86% (71 000m2) of space expiring during H1FY2022 at an average negative reversion of c.9% (March 2021: -17.7%). A further 35 000m2, comprising of c.40% of opening vacancy, was also let. Its total leasing includes 19 deals in the office sector amounting to 10 000m2 at a weighted average lease expiry (WALE) of four years, despite a challenging office market with minimal rental reversions experienced in its industrial and retail assets.

The company also reported a reduction in Covid-19 rental relief – R8 million during H1FY2022 compared to R55 million in September 2020.


Its PEL portfolio, reporting a significant outperformance since its original investment in 2018 – a 55% uplift on gross asset value – is expected to remain consistent with strong base net property income growth of between 7% – 9% (September 2020: 2.75) driven by improvement in service charge recoveries, reduction in bad debt provision related to Covid-19 and positive rental reversions but, partially offset by increased void periods due to refurbishment works in its Hanover and Carpiano assets.

Vacancies reduced to c.4% (March 2021: 4.3%) and Investec expects this to reduce further during H2. With 46% of opening vacancy let, 52% of space expiring in H1FY2022 was renewed or let at a positive reversion between 2% – 3% and 57% of space (subject to break options) during H1FY2022 was re-let.

WALE was maintained at 4.0 years to break (March 2021: 3.8 years) and 5.0 years to expiry (March 2021: 5.0 years).

Average PEL rental collections remain strong at almost 100% and the company’s arrears have reduced since yearend to €2.1 million (March 2021: €3.7 million).

Investec Property Fund has made significant headroom in its debt yield and LTV covenant, and it continues to target an LTV ratio of between 55% – 60% to lower risk operating environment, strong underlying cash flows and persisting low interest rates.

The company anticipates distributable income per share growth of between 3% – 4% which translates into 5% – 6% growth in ZAR with c.2% blended foreign exchange (FX) uplift achieved.

Investec Property Fund will be releasing its results for the half-year ended 30th of September 2021 on the 17th of November 2021.