Investec Property Fund has achieved a strong set of H1 results for its six months ended September 2021, reporting an increase of 11.8% year-on-year for its distributable income per share, which, together with its continued balance sheet strength and sustained gearing of 37.9%, has seen the REIT declare an interim dividend of 49.77 cents per share. This represents a 95% pay-out ratio which has been maintained since FY21.
“Through hands-on active management of assets, and pursuing a focused leasing and client acquisition strategy, we have concluded notable lease renewals and materially reduced vacancies in the South African portfolio”, commented CEO of Investec Property Fund, Darryl Mayers.
“We also continue to improve our assets in line with our commitment to providing a superior client experience and have submitted a proposal for the refurbishment of Balfour Mall, as well as started the refurbishment of Design Quarter. It is this focus on the client, across our portfolio and specifically in the office sector, that will provide a space that breeds positive corporate culture, innovation and collaboration that we believe will contribute to the eventual return to the office”.
The company’s Pan European Logistics portfolio continues to perform well, delivering base net property income (NPI) growth of 8.3% in Europe for the interim period, driven by positive rental reversions, and distributable income per share (DIPS) growth of 3.5% year-on-year in Europe, and 5.5% on a like-for-like basis in ZAR.
European logistics has witnessed strong yield compression over the past twelve months with prime yields in key Western markets converging to record low levels with initial yields which are now trading in the mid-3%, reflecting a c.100bps contraction from November 2020. A key driver of this compression is the wall of capital competing for this asset class, given potential future rental growth. These pricing levels are unprecedented and set new standards for the sector. The Pan-European Logistics portfolio is well-positioned to take advantage of these favourable market conditions, having captured both positive rental growth and valuation uplift during the interim period. Portfolio metrics remained healthy with vacancy further reduced to 2.8%.
“The current environment requires a very measured approach where the core focus in South Africa will remain on leasing and active asset management to restore net operating income to pre-property cycle downturn and pre-Covid-19 levels, including a high-touch approach to retain tenants. In Europe, the fund is considering various options to maximise value, including the introduction of third-party capital to support platform growth”, says joint CEO, Andrew Wooler.
Should market dynamics remain consistent, the fund anticipates a similar performance in H2 with expected distributable income per share (DIPS) growth of between 10% – 12% for FY22. The South African portfolio remains stable and further uplift is expected in H2’s performance relative to H1, driven by the reduction in vacancies and shorter void periods relative to the prior year. The office sector is expected to remain stagnant with reversions offsetting contractual rental growth. Pan-European Logistics performance is set to remain consistent with growth driven by positive rental reversions and the commencement of a development in Poland during Q2 2022.
“Investec Property Fund’s key priority is to maintain a well-positioned balance sheet with capacity to support long-term growth. Capital recycling remains central to support earnings and quality enhancement and we remain opportunistic to acquisitions that align with our existing strategy and represent value-add opportunities”, added Wooler.
“The fund is committed to weathering the storm and unlocking shareholder value with the portfolio benefitting from the bench strength of our exceptional team. We are proud of the work that is being done in progressing our sustainability strategy as well as our achievement of Level 1 broad-based black economic empowerment (BBBEE) contributor rating, the first in the REIT sector. We believe the Fund is well-placed to achieve our strategic priorities, to the benefit of all stakeholders,” concluded Mayers.
