Investec accelerates book-build ahead of rate hikes

Investec Property Fund raises R561m in an accelerated book-build in a move strategically timed before interest rates rise in SA and the US.

Investec Property Fund (IPF) has managed to raise R561m in an accelerated book-build in a move strategically timed before interest rates rise in SA and the US‚ according to CEO Nick Riley.

There is speculation the South African and US central banks will raise interest rates in the second half of this year or early next year‚ which will make it more expensive for property funds to borrow money for acquisitions.

“Listed property has enjoyed a 10-year bull run and the last five years or so of that have been a period in which raising capital has been relatively easy. But this is going to become tougher‚ which is why we have got in now‚ before interest rates rise and before economic conditions in general get tougher‚” Mr Riley said.

Money raised from the book-build will be used to partly finance IPF’s acquisition of the industrial-focused property portfolio from private group Griffin Holdings.

IPF will spend R826m on the portfolio of 22 properties at a yield of 9.3% based on contractual income. It has R2.6bn of funding facilities in place‚ some of which would be used to fund the rest of the Griffin acquisition.

The portfolio has contractual‚ above inflation‚ in-force escalations of 8.6%. It also has a 3.2-year weighted average lease expiry and no vacancies.

The acquisition boosts IPF’s assets to R9.5bn‚ close to the R10bn target set out at listing just more than four years ago.

Industry veterans Leon and Sam Hackner listed the fund with 29 properties worth R1.77bn at the time.

The portfolio includes industrial properties‚ motor dealerships and office properties.

The book-build was placed by the larger Investec group.

The build opened at market close on Thursday and raised the R561m at a price of R15.70.

Some analysts have said that IPF might have run on too much hype at first‚ given that it came from well-known investment bank Investec and that it was led by a team of highly experienced property managers.

However‚ they have been impressed with how the fund has built up a diversified portfolio.

Old Mutual Investment Group’s Evan Robins said the fund was well run and had positioned itself for a future improvement in the performance of industrial and office properties.