March 3 2023
Investec Property Fund (IPF) has entered into separate binding agreements in respect of three transactions which will help it to grow and diversify its asset base.
The transactions include the internalisation of its asset management function in SA and Europe for R975m, which will be settled via an asset consideration of R390m; an upfront cash payment of R260m and a deferred consideration of R325m. IPF will also acquire an additional 19% stake in the fund’s Pan European Logistics (PEL) platform for R1.86bn with its Entrepreneurship Development Trust acquiring the remaining 6% stake. It will enter into a joint venture with Australian-based real estate manager, Irongate Management Fund, with the original management team led by Graeme Katz and will also buy a stake in Irongate.
These transactions will result in IPF becoming a fully integrated international real estate fund and asset management company which has a loan-to-value (LTV) below 40%. LTV is used as a measure of a fund’s health. It compares a fund’s debt levels relative to its assets. Fund managers which invest pension money in property stocks, prefer for LTVs to be below 40%.
“As part of our growth strategy this announcement sees IPF become even better aligned to becoming an international fund and asset management business that is able to generate returns through the property life cycle, leveraging both its capital and people in a more efficient and effective way,” said Investec Property Fund CEO, Andrew Wooler.
The combined entity, 53% of which will be offshore and 47% in SA, and which will have R35bn in assets across nine countries, and A$450m of equity under management, will provide IPF with new avenues for growth and even greater flexibility to unlock further value for its shareholders.
IPF is investing deeper into its PEL platform.
“While global interest rates remain uncertain, the decision to increase our exposure to the PEL platform was premised on the strength of the underlying real estate fundamentals that continue to underpin the valuation and long-term returns. The PEL portfolio continues to outperform with rental growth accelerating over recent months. Over the past 12 months, the PEL platform has delivered circa 8% net operating income growth on the back of 7% positive rental reversions, with top line contractual rentals growing by 10.5% over the same period,” said Wooler.
Once the PEL transaction is complete, IPF will have an 84% shareholding in the PEL platform. The Entrepreneurship Development Trust (EDT) will own a 6% interest, while the remaining 10% will be a passive holding by various private clients of Investec Wealth and Investment.
IPF has entered into a 50/50 joint venture with Irongate Australia, which is the management team of Irongate Australia Fund Management. The transaction will lead to a buyout of Irongate Australia Fund Management from Charter Hall. IPF will also acquire a 18.67% stake in the Templewater Australia property fund which is managed by Irongate Australia Fund Management.
Irongate was previously called Investec Australia Property Fund.
Irongate has successfully returned all capital plus profits over the past 15 year. The Irongate transaction includes a profitable real estate funds management business with about A$450m equity under management in assets, with a gross realisable value of circa A$2.75bn.
“We are looking forward to this exciting next step in our journey. At its culmination we will become a standalone fully integrated international real estate company, delivering attractive returns for our investors and sustainable outcomes for the communities in which we invest,” said Wooler.