Investec fund slowed by weakness of Australian dollar

Investec Australia Property Fund experiences a rocky time while offshore-invested property funds such as Rockcastle Global Real Estate and New Europe Property Investments perform well over the past year.

WHILE offshore-invested property funds such as Rockcastle Global Real Estate and New Europe Property Investments have performed well over the past year, particularly in terms of share price growth, Investec Australia Property Fund (IAPF) has had a rocky time.

The fund’s share price closed at R11.80 on Friday, meaning it had grown 5% from R11.21 on August 21 last year. Its soft performance relates in part to currency effects, with the Australian dollar weakening against the rand.

With a market capitalisation of about R2.9bn, IAPF is one of the smaller property funds on the JSE. It is a diverse fund that invests in office, industrial and retail property in Australia. Some analysts believe it needs to grow more aggressively to attract institutional investors.

“Investec Australia ticks most boxes. It’s a simple, well-structured and easy-to-understand fund,” Keillen Ndlovu, head of listed property funds at Stanlib, said on Friday. “However, the Aussie dollar hasn’t done well against the rand over the past year, that is the rand strengthened against the Aussie dollar.

“Investec Australia needs time, scale and better liquidity to see the share price perform better.”

Grindrod Asset Management chief investment officer Ian Anderson said there was concern about a relatively weak Australian economy.

“Right now I think it has got more to do with concerns around the Australian economy and the fact that the rand has strengthened against the Aussie dollar — since peaking at around R10.15/A in July last year, the rand has strengthened to around R9.50/A right now,” Mr Anderson said.

IAPF continues on the acquisition trail, announcing last week it had bought an A18.15m property in one of Brisbane’s core industrial nodes. The acquisition brought the value of the fund’s total portfolio to A379.45m. The acquisition would be fully funded with debt, to take the fund’s gearing to 33%.

IAPF CEO Graeme Katz said the fund was growing well amid difficult economic conditions.

“The acquisition is the eighth property acquired by the fund since our rights issue late last year, reflecting management’s ability to unlock off-market transactions in a very competitive market,” he said.