Investec Property Fund faces stiff competition in Europe

Investec Property Fund (IPF) is taking a gamble by making European logistics assets its offshore focus. This looks like a calculated move on the face of it but it won't necessarily prove to be a masterstroke.

IPF said on Tuesday it would exit the UK by selling its 38.04% stake in property owner Argo Property Fund.

The group was smart to sell its interests in Investec Australia Property Fund, now called Irongate Group, in 2020 at a hefty profit. It leaves IPF investing solely in SA as well as its fast-growing pan-European logistics platform.

Co-CEOs Andrew Wooler and Darryl Mayers say that there is large demand for warehousing and high-end logistics properties as online shopping is less developed on the continent than it is in the UK.

But while their logistics platform grows, so does the competition in Europe. They now need to prove to their investors that they and their management partners can sweat their assets there especially while some of their SA assets are battling along.

South Africans may be shopping under level 1 lockdown restrictions but many aren't cash-flush, having taken salary cuts in 2020 amid the pandemic, with the economy contracting 7%. Many people have also been retrenched and are cashing in pensions while they struggle to find new jobs.

Mayers said at the end of September that IPF was having challenges with certain legacy assets in SA. These included The Firs, a multi-use centre in Rosebank; lifestyle centre Design Quarter in Fourways; and Balfour Mall in Balfour Park.

Balfour Mall remains a well-known legacy asset in the area that has not seen basic infrastructure upgrades in years.

Mayers said IPF had a plan for the Design Quarter, but that it did not necessarily mean the asset would be sold in the near future.

IPF has seen its share price rise 12% over the past 90 days as investors regain confidence in listed property and foresee a resurgence in the sector in 2021.