ALEC HOGG: On wonders if it's a such a good place to be putting your money into property right now. I'm sure that Sam Leon, who’s the chief executive of Investec Property Fund Ltd would disagree with any questions on that front. But Sam, it's interesting to note from the outside that Old Mutual announced that it's going to be listing a R12bn property portfolio this year, and then today your company, Investec, said you also are going to be listing a property portfolio of R1.7bn. Now, the sceptic in me says the time the big companies take portfolios to the stock market to sell off into the public is the time you should be worried about valuations.
SAM LEON: Alec, I don’t think so. I talk in terms of our particular fund. We are coming to market with a relatively small fund, which is a platform for growth. Our forward yield is at around 9.5%, which is at a discount to the sector, and I think we are comfortable with our underlying portfolio and the solidity of the income stream. And in fact we are finding that the property fundamentals are improving. So I think the key question is: is there value to the investor?
ALEC HOGG: At 9.5% I am sure there aren't going to be too many people quibbling with that. You’ve got 29 properties in this portfolio – where are they, primarily?
SAM LEON: They are really primarily in Gauteng, some in the Western Cape and some in KZN.
ALEC HOGG: Would we recognise some if you told us the names?
SAM LEON: Of the real estates? I think in terms of high-profile properties, if you like, there is the Woolworths head office in Cape Town, that’s part of the portfolio, and the Investec building itself in Investec’s new regional office in Umhlanga Ridge. Those are a couple of the high-profile properties, and some very good-quality industrial properties…
ALEC HOGG: Will you be selling any units to the public…?
SAM LEON: The placing has already been completed and there’s a mix of institutional and private investors, mainly through various security companies.
ALEC HOGG: And it is ungeared? In other words, no borrowing?
SAM LEON: It is totally ungeared at day one.
ALEC HOGG: Dos that mean that you are going to be going out there and borrowing money to expand?
SAM LEON: I think it does give us the capacity to acquire and we’d have to look at the appropriate time. We are not going to grow at all costs; we are not going to be lazy but we are not going to grow at all costs. And I think at the appropriate time it’ll be a mix of equity and borrowing because we intend to limit our gearing to the 10, 30 and 40% as they are relatively conservative on that front.
ALEC HOGG: Sam Leon is the chief executive of Investec Property Fund.
This interview was broadcast on The SAfm Market Update with Moneyweb (SAfm 104-107fm, weekdays at 18:00 to 18:30)
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