GLOBAL Credit Ratings has upgraded Investec Property Fundâ€™s long and short-term ratings because of the companyâ€™s consistent growth since listing about four and a half years ago.
Investec Property Fundâ€™s biggest deal has been its proposed acquisition of Zenpropâ€™s R7.1bn portfolio announced earlier this month in a major coup for new CEO Nick Riley.
The 26-property Zenprop portfolio includes high-quality office and industrial properties. The premium office buildings are 1 Protea Place, Sandton, which is majority tenanted by DLA Cliffe Dekker Hofmeyr; and 3 and 4 Sandown Valley Crescent, tenanted by TBWA, Standard Chartered and Boston Consulting Group.
â€œEven prior to the announcement of the Zenprop acquisition, Investec Property Fund has shown exceptional growth, with its property portfolio expanding from R1.7bn at listing in 2011 to R8.5bn at the end of the 2015 financial year,â€ Patricia Zvarayi, senior credit analyst at Global Credit Ratings said.
Global Credit Ratings upgraded the national scale ratings of Investec Property Fund to A(ZA) and A1(ZA) in the long and short term respectively.
The Zenprop acquisition and the acquisition of an R826m industrial asset portfolio from Griffin would raise the value of investments to about R16.4bn, comfortably placing the fund at the upper end of middle tier domestic Reits in terms of scale, said Ms Zvarayi.
Investec Property Fund had made impressive strategic plays.
â€œAlbeit initially income dilutive for shareholders, the Zenprop deal adds quality, defensiveness and income predictability to an already robust portfolio, enhancing the weighted average lease expiry and tenant quality. While â€˜Aâ€™grade tenancies were diluted to 63% by the higher retail exposure at the end of the 2015 financial year, the incorporation of Zenprop properties should see it revert to around the 70% level.â€
Vacancies were kept at low levels over the review period, and were expected to ease further with the inclusion of the Zenprop assets, while the fairly long average lease expiry reflected the quality of properties held and strong management, according to Ms Zvarayi.
In the year to date, Investec Property Fundâ€™s share price has climbed nearly 3.5% to R16.