CAPE TOWN – Investec Property Fund (IPF) has warned that “a number of distinguished enterprise failures will affect” its outcomes for the monetary yr to March 31, 2021 as South Africa’s economic system weakens by the Covid-19 pandemic.
IPF, which owns 98 properties in South Africa, Europe and UK, mentioned in an replace on Friday that leasing exercise in South Africa would doubtless be slower than anticipated, with longer void durations and extra strain on rental ranges. The share worth closed 0.31% decrease at R9.65 on the JSE on Friday.
Greater than 80% of its tenants are massive or listed firms. Tenant failures have been anticipated to pose “a major danger” to IPF’s skill to develop income, the group mentioned in an operational replace.
Previously yr massive firms together with Edcon and ELB Engineering, which had accounted for R38million of annual gross earnings to IPF, had gone into administration.
The Pan European Logistics (PEL) portfolio was much less impacted by the Covid-19 pandemic – logistics has been essentially the most resilient of the actual property sectors globally by this disaster.
However PEL had not been proof against tenant failures, with a big logistics enterprise occupying two properties going into enterprise rescue in Might 2020.
“In South Africa, demand for house within the workplace, retail and industrial sectors weakened within the first quarter, and leasing exercise has slowed as anticipated, with lease negotiations turning into extra protracted. It will lead to emptiness charges edging larger and can affect rental ranges,” the group mentioned.
The R743m raised from the sale of a 9percent stake in Investec Australia Property can be used to de-gear.
IPF had offered 5 properties in South Africa for R886m. With the reopening of the Deeds Workplace, two had been transferred, producing R282m of proceeds, whereas the Musina property (R517m) was anticipated to switch earlier than the tip of July.
Talks have been underneath means with potential buyers to accumulate a 10% stake within the PEL platform.
IPF’s gearing, with asset gross sales and a sale of the 10% stake in PEL, was anticipated to cut back to 35%, publish the PEL refinancing.
Rental reduction discussions with tenants in South Africa was prone to result in short-term earnings shortfalls because of rent-free durations and different leasing incentives offered to safe the prolonged leases.
European letting exercise confirmed sturdy progress since Might 2020, but additionally skilled a marginal slow-down because of lockdown restrictions and the shortcoming to journey and entry property.
In South Africa, publish rental reduction offered, money assortment in June was 99%.
IPF had agreed R87m of rental reduction to qualifying tenants, equal to 5percent of annual gross earnings.
“The tempo at which arrears are collected in South Africa is slowing, resulting in larger debtor balances for longer durations, creating an inherent improve within the danger of dangerous debt,” the group mentioned.
A last dividend resolution for 2020 had been deferred to early September 2020, so the financial affect of the pandemic may very well be additional assessed.