Investec Property Fund
Investec Property Fund Limited (IPF) is a South African Real Estate Investment Trust (REIT) which listed on the Johannesburg Stock Exchange (JSE) in 2011. The Fund’s investment portfolio comprises R27 billion of direct and indirect real estate investments in South Africa, the UK and Europe.
In South Africa, the Fund directly owns a sizeable portfolio of 92 properties in the retail, industrial and office sectors valued at R15.7 billion and a 35% interest in Izandla valued at R0.3 billion. c.50% of the Fund’s balance sheet and 45% of earnings are derived from offshore investments. This comprises strategic property investments, mainly in logistics, in the developed markets of Europe and the UK where the Manager has a presence on-the-ground with in-country expertise. These investments include an interest in Argo UK Fund (“UK Fund”) of R1.0bn, an investment into a Pan-European logistics portfolio of R6.8bn and an investment into a Pan-European light industrial portfolio of R0.3bn.
The Fund’s best of breed portfolio has been built based on adhering to its investment philosophy of acquiring quality assets with compelling property fundamentals in targeted sectors in selected geographies where it has in-country expertise. More recently, the Fund has strategically shifted its focus towards the logistics sector, as a result of which, logistics assets now comprise 46% of IPF’s investments globally.
IPF is a company incorporated in South Africa with registration
number 2008/011366/06, listed in the Real Estate Holdings and Development sector and obtained REIT status on 1 April 2013.
Diversification across core developed markets.
IPF’s diversified balance sheet, with investments in developed markets offshore as well as a quality local portfolio, has allowed the Fund to generate returns throughout the cycles and enables it to deliver on its objective to optimise capital and income returns over time for shareholders.
| SA properties | UK Fund | Izandla investment | Pan-European logistics platform | Pan-European light industrial platform | |
|---|---|---|---|---|---|
| Number of properties | 92 | 14 | 15 | 47 | 25 |
| GLA | 1,111,190 m 2 | 113,409 m 2 | 83,343 m 2 | 1,131,730 m 2 | 164,000 m 2 |
| Value | R15.7bn | £267m | R748m | €987m | €126m |
| Holding | 100.0% | 38.0% | 35.0% | 65.0% | 25.0% |
Performance
Strong performance considering the challenging operating environment. IPF delivered 1.3% year-on-year growth in base net property income for the six months ended 30 September 2019. Net asset value per share grew by 1.5% while vacancy ticked up marginally to 3.9% from 2.4% in March 2019. A final distribution of 70.93 cents per share for the period was declared, resulting in year on year distribution growth of 3.1%.
3
.0
%
Growth in earnings available for distribution
11
.5
%
Increase in net asset value (NAV)
3
.5
%
Vacancy (Sep 2019: 3.9%)
47
.5
%
Gearing (Sep 2019: 37.3%)
Pan European real estate logistics portfolio
The Pan European logistics platform consists of 47 logistics properties, valued at c. €985m with a total GLA of over 1.1 million square meters across France, Germany, Italy, Poland, Spain, Netherlands and Belgium. The portfolio is managed by an experienced on-the-ground team with in-country expertise.
The Pan European logistics platform consists of 47 logistics properties, valued at c. €985m with a total GLA of over 1.1 million square meters across France, Germany, Italy, Poland, Spain, Netherlands and Belgium. The portfolio is managed by an experienced on-the-ground team with in-country expertise.
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Key differentiators
Though we achieved significant progress, we believe there’s room for improvement. We continue to focus on our four pillars as a key strategic priority.
Revenue security and growth
We aim to keep our vacancies low (they have decreased from 4.0% to 3.1%, excluding development vacancies). We invest ahead of time to secure our revenue stream. We create innovative solutions, tailored to our client needs.
01
Client service excellence
Our client service distinguishes IPF from other property funds. Our client engagement feedback strategy ensure that we address client needs timeously to keep our service delivery relevant. We do this through a scoring mechanism which provides us with measurable and actionable objectives.
02
Value add asset management and capital allocation
- With our relevant, efficient core offering, we:
- Make sure our level of service continues to set us apart
- Maintain efficient capital allocation
- Maximise long-term risk adjusted returns
- Increase offshore exposure to 20% (a core objective)
- Allocate up to 10% into ‘broken core’, value-add transactions and specialised assets.
03
Cost efficiency and system optimisation
In the current environment, our primary focus is on keeping our costs largely below inflation. We commit to spending to improve our client service and/or to enhance the safety and security of IPF’s offering. Our variable expenses have grown as we’ve increased our client incentives in this competitive environment.
04
Key highlights
Click on the arrows for regional property highlights.
Gauteng
21
INDUSTRIAL
26
OFFICE
15
RETAIL
GEOGRAPHICAL SPREAD 64%
Free State
2
INDUSTRIAL
2
OFFICE
2
RETAIL
Geographical spread 6%
Eastern Cape
2
RETAIL
KZN
8
INDUSTRIAL
2
OFFICE
2
RETAIL
Geographical spread 12%
Mpumalanga
2
RETAIL
Limpopo
2
RETAIL
Geographical spread 2%
North West
1
RETAIL
Northern Cape
1
RETAIL
Western Cape
1
INDUSTRIAL
2
OFFICE
4
RETAIL
Geographical spread 10%
Corporate governance
IFP has adopted a risk and governance structure which allows it to operate effectively through various board committees.
Stakeholders
Shareholders, regulators, clients, suppliers and communitites.
IPF Board of directors
Audit and Risk Committee
Social and Ethics Committee
Investment Committee
Nominations Committee
Audit and Compliance Implementation Forums
Internal Audit
Compliance
External Auditors
Board responsibilities
The IPF board is ultimately responsible for financial performance and corporate governance. The IPF board and its committees assess and manage risk policies and philosophies, ensure appropriate internal controls and oversee major capital expenditure, acquisitions and disposals. They also approve the establishment of businesses and the introduction of new products and services. The IPF board works with its management to implement plans and strategies.
Sustainability
Our sustainability focus is on building the Fund while making a tangible, positive impact on the economic and social development of communities around us, as well as on the environment. In addition, sustainability is made possible by growing and safeguarding our clients’ business and stakeholders’ interests through strong relationships of trust.
Continuous advancement
The Fund’s sustainability goals reflect our culture of continuous advancement. They reaffirm our belief that sustainability, in its broadest sense, is about managing and positioning our business for the long term.
In line with King IV guidelines and our own business strategy, ours is a balanced economic, social and environmental model that creates sustainable investments for long-term financial growth.
Our environment
Our strategy for environmental sustainability strategy is to focusfocused on five key areas:
1
Mitigating risk
We implement solutions to safeguard continuous electricity and water supply to IPF’s buildings
2
Creating energy and water efficiencies
We look for opportunities to reduce the use of energy and water in IPF’s buildings – and we put efficiency interventions in place.
3
Using renewable energy
We implement solar PV projects on the Fund’s buildings where feasible and explore other sources of renewable energy.
4
Monitoring and managing our utilities
We have installed bulk check metering with remote access across IPF’s entire portfolio. This means we can accurately measure electricity and water consumption and verify the accuracy of municipal billing.
Our Transformation
Broad-based black economic empowerment, transformation and CSI
IPF recognises that inclusive economic growth and societal transformation is vital to creating a sustainable future for all South Africans. IPF is aligned to the commitments made in the Property Sector Code, by all stakeholders within the sector, to strive to transform property relations in South Africa and contribute towards the development and establishment of an equitable society.
IPF has been awarded a level 4 rating under the revised Property Sector Code.
IPF’s approach to transformation includes a focus on supplier and enterprise development, procurement, economic development and socio-economic development. Some highlights of our transformation initiatives are detailed below:
.
IPF B-BBEE certificate
Growing South Africa's property entrepreneurs:
AMP
In 2016 IPF rolled out an enterprise and supplier development initiative known as AMP. The purpose of AMP is to bring together various disciplines of the property industry to facilitate opportunities for collaboration that will nurture and grow their offerings, services and projects. As part of IPF’s enterprise and supplier development offering we have provided these entrepreneurs with subsidised office space, skills, mentorship and assistance with facilitating procurement opportunities. Several stakeholders are involved in this initiative including the executive and senior management of IPF as well as the external property management companies engaged with IPF.
There are currently six black-owned SMMEs in AMP and 2019 will see the roll out of the second phase where IPF has identified an additional seven black owned SMME’s in the property sector to partner and collaborate with and assist in developing and nurturing entrepreneurial talent in the property sector.
Unlocking maths and science knowledge
ProMaths is a powerful partnership between Investec and Kutlwanong Maths, Science and Technology Centre, which IPF contributes to and participates in. The programme provides extra tuition in maths and science to learners in grades 10 to 12 at selected schools across South Africa. IPF sponsors 48 students in the Khayelitsha area to attend ProMaths lessons every week. This sponsorship will continue until the 48 learners complete grade 12.
Improving resources in communities
Economic Development
IPF holds substantial property investments in under-resourced areas including, but not limited to, Umtata, Musina, Polokwane, Kriel and Khayelitsha. We have unlocked further value in these areas during the past year through refurbishments and redevelopments. IPF remains committed to directing investment into under- resourced
areas to alleviate service inequality, and to support and develop micro and small enterprises.
