Investec Property Fund (IPF) has tempered its distributable income per share guidance from marginal to negative growth for its full financial year, from a previous low single-digit growth forecast, due to higher interest rates in South Africa and Europe.
IPF’s results released yesterday for the six months to September 30, saw its sectoral and geographic asset diversity in South Africa and Europe help to raise the dividend to 51.09 cents per share from 49.77 cents at the same time the year before.
CEO Andrew Wooler said in a statement the rising interest rate environment was expected to impact earnings in the second half. However, there was opportunity to take advantage of the current dislocation, “through the hands-on management of the on-the ground team as they seek to unlock further value”.
He said the past six months had been a period of increasing unpredictability globally, but “our deliberate strategy to sell out of risk, and recycle capital into top quality assets sees investment project financing (IPF) well positioned to withstand the volatility. This is backed up by our skilled management teams, all of whom have first-hand experience of leading through uncertainty”.
Distributable income per share increased 2.7% to 53.78 cents per share. The stability of both portfolios, proactive asset management and balance sheet strength saw the dividend payout ratio maintained at 95%. The loan to value ratio of 38.3% remained stable.
Wooler said going into the second half, the fund will have significantly reduced refinancing risk following a R5.3 billion debt refinance to be completed this month. The refinance would extend IPF’s debt maturity by around two years, and included a significant environmental, social, and governance (ESG) element.
He said over the past six-month period South Africa’s economic activity continued to increase, and the real estate investment trusts (REIT) sector progressed its recovery at a slow pace, navigating a long period of volatility. IPF had benefited from strong industrial performance, supported by steady retail recovery .
Year-on-year vacancy fell to 7.1% from 9.8%, and reduced further to 5.2% post the half-year end, with strong letting activity which had seen 88% of all space expiring in the period, being relet.
He said although the Eurozone had begun to feel the impact of the Ukraine war, energy crisis and inflation, there had been limited impact on the logistics sector so far, with the strong momentum in 2021 continuing into the first half of 2022.
“The portfolio continues to capture rental growth, supported by a resilient occupier market, positive rental reversions, robust demand and rising indexation. The business is well positioned to absorb potential future impacts of inflation and cost pressures on the occupier base,” Wooler said.