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INVESTEC PROPERTY FUND LIMITED - Reviewed Interim Results for the six months ended 30 September 2016

Release Date: 16/11/2016 07:30
Code(s): IPF     PDF:  
Wrap Text
Reviewed Interim Results for the six months ended 30 September 2016

INVESTEC PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2008/011366/06)
Share code: IPF    ISIN: ZAE000180915
(Income tax reference number 9332/719/16/1)

2016
INTERIM RESULTS

Key highlights
for the six months ended September 2016

9.1%
BASE NET PROPERTY
INCOME GROWTH

2.2%
INTERIM DIVIDEND PER
SHARE GROWTH
(exceeds guidance)

1.5%
LOW VACANCY
MAINTAINED

87%
of H1 expiries let

220bps
IMPROVEMENT IN
OPERATING MARGIN

KEY FINANCIAL INDICATORS

Net cost to income ratios
Sep 2016     Sep 2015
15.7%        17.9%

Vacancy %
Sep 2016     March 2016
1.5%         1.1%

In-force escalations
Sep 2016     March 2016
7.8%         7.8%

Weighted average lease expiry
Sep 2016     March 2016
3.5 years    3.7 years

Gearing %
Sep 2016     March 2016
32.6%        34.1%

Consolidated statement of comprehensive income

                                                                               Reviewed       Reviewed                 
                                                                             Six months     Six months       Audited   
                                                                                  ended          ended    Year ended   
                                                                           30 September   30 September      31 March   
R'000                                                                              2016           2015          2016   
Revenue, excluding straight-line rental revenue adjustment                      814 782        438 923     1 102 579   
Straight-line rental revenue adjustment                                          78 862         68 845        92 259   
Revenue                                                                         893 644        507 768     1 194 838   
Property expenses                                                             (127 969)       (78 452)     (177 830)   
Net property income                                                             765 675        429 316     1 017 008   
Other operating expenses                                                       (27 669)       (28 536)      (49 328)   
Operating profit                                                                738 006        400 780       967 680   
Fair value adjustments                                                         (23 897)         36 478       358 273   
Profit on disposal of investment property                                        10 624          2 630        13 568   
Income from investment                                                           20 478         19 314        46 645   
Finance costs                                                                 (257 824)       (89 837)     (278 492)   
Finance income                                                                    4 742          2 632         7 851   
Profit before taxation                                                          492 129        371 997     1 115 525   
Taxation                                                                           (24)          (789)       (2 042)   
Total comprehensive income attributable to                                                                             
equity holders                                                                  492 105        371 208     1 113 483   

Distribution reconciliation                                                                                            
Profit after taxation                                                           492 105        371 208     1 113 483   
Adjusted for:                                                                                                          
Fair value adjustments                                                           23 897       (36 478)     (358 273)   
Profit on disposal of investment property                                      (10 624)        (2 630)      (13 568)   
Straight-line rental revenue adjustment                                        (78 862)       (68 845)      (92 259)   
Antecedent dividend                                                                   -          2 065        27 485   
Less: Interim dividend paid                                                           -              -     (286 665)   
Less: Clean out dividend paid                                                         -              -     (142 683)   
Interim dividend                                                                426 516        265 320       247 520   
Number of shares                                                                                                       
Shares in issue                                                             700 228 202    444 978 329   700 228 202   
Weighted average number of shares in issue                                  700 228 202    441 562 857   519 535 592   
Cents                                                                                                                  
Interim dividend per share                                                        60.91          59.63         35.35   
Basic and diluted earnings per share                                              70.28          84.07        214.32   
Headline and diluted headline earnings per share                                  68.76          83.47        165.24   

Consolidated statement of financial position

                                                                               Reviewed       Audited       Reviewed   
                                                                           30 September      31 March   30 September   
R'000                                                              Notes           2016          2016           2015   
ASSETS                                                                                                                 
Non-current assets                                                           17 024 999    17 033 333      8 868 534   
Investment property                                                          16 019 422    16 129 988      8 017 017   
Straight-line rental adjustment                                                 408 588       329 725        306 311   
Derivative financial instruments                                                  9 363        41 848         14 732   
Investment                                                             3        587 626       531 772        530 474   
Current assets                                                                  300 315       212 420        245 461   
Trade and other receivables                                                     156 046       158 959        101 615   
Cash and cash equivalents                                                       144 269        53 461        143 846   
Total assets                                                                 17 325 314    17 245 753      9 113 995   
EQUITY AND LIABILITIES                                                                                                 
Shareholders' interest                                                       11 342 111    11 097 103      6 857 226   
Stated capital                                                                9 714 108     9 714 108      5 813 900   
Retained earnings                                                             1 628 003     1 382 995      1 043 326   
Non-current liabilities                                                       4 950 210     5 139 422      1 815 968   
Long-term borrowings                                                          4 878 059     5 093 477      1 795 589   
Derivative financial instruments                                                 72 151        45 945         20 379   
Current liabilities                                                           1 032 993     1 009 228        440 801   
Trade and other payables                                                        371 845       310 104        200 822   
Current portion of non-current liabilities                                      661 148       699 124        239 979   
Total equity and liabilities                                                 17 325 314    17 245 753      9 113 995   
Shares in issue                                                             700 228 202   700 228 202    444 978 329   
NAV per share (cents)                                                              1620          1585           1541   

Condensed consolidated statement of cash flows

                                                                               Reviewed       Audited       Reviewed   
                                                                           30 September      31 March   30 September   
R'000                                                                              2016          2016           2015   
Cash generated from operations                                                  722 191       906 387        359 490   
Finance income received                                                           4 742         7 851          2 632   
Finance costs paid                                                            (259 412)     (261 426)       (83 965)   
Income from investment                                                           19 650        44 620         17 824   
Taxation paid(1)                                                                   (24)       (2 042)          (789)   
Dividends paid to shareholders                                                (247 097)     (711 403)      (281 650)   
Net cash inflow/(outflow) from operating activities                             240 050      (16 013)         13 541   
Net cash inflow/(outflow) from investing activities(2)                          101 097   (6 452 745)       (50 229)   
Net cash (outflow)/inflow from financing activities(3)                        (250 339)     6 461 224        119 540   
Net increase/(decrease) in cash and cash equivalents                             90 808       (7 534)         82 852   
Cash and cash equivalents at the beginning of the period                         53 461        60 995         60 995   
Cash and cash equivalents at the end of the period                              144 269        53 461        143 847   

(1) Withholding tax on distribution received from Investec Australia Property Fund ("IAPF").
(2) Investing activities include additions and improvements to investment properties, purchase of properties and proceeds from sale of investment properties.
(3) Financing activities include term loans raised, corporate bonds, commercial paper repaid and current borrowings raised and repaid.

Condensed consolidated statement of changes in equity

                                                                                Reviewed      Audited       Reviewed   
                                                                            30 September     31 March   30 September   
R'000                                                                               2016         2016           2015   
Balance at the beginning of the period                                        11 097 103    6 615 768      6 615 768   
Total comprehensive income attributable to equity holders                        492 105    1 113 483        371 208   
Shares issued (net of expenses)                                                        -    4 047 784        136 540   
Dividends declared                                                             (247 097)    (679 932)      (266 290)   
Balance at the end of the period                                              11 342 111   11 097 103      6 857 226   

Condensed consolidated segmental information

For the six months ended 30 September 2016                                                                             
R'000                                                                   Office   Industrial      Retail        Total   
Statement of comprehensive income extracts                                                                             
Revenue, excluding straight-line rental revenue adjustment             324 500      196 149     294 133      814 782   
Straight-line rental revenue adjustment                                 26 764       22 775      29 323       78 862   
Revenue                                                                351 264      218 924     323 456      893 644   
Property expenses                                                     (45 976)     (27 517)    (54 476)    (127 969)   
Net property income                                                    305 288      191 407     269 980      765 675   
Statement of financial position extracts                                                                               
Investment property opening balance                                  6 552 959    3 847 683   6 059 071   16 459 713   
Net additions, acquisitions, disposals and re-allocations             (48 556)     (20 699)    (41 310)    (110 565)   
Fair value adjustment and straight-lining                               26 764       22 775      29 323       78 862   
Fair value of investment property                                    6 531 167    3 849 759   6 047 084   16 428 010   

For the six months ended 30 September 2015                                                                             
R'000                                                                   Office   Industrial      Retail        Total   
Statement of comprehensive income extracts                                                                             
Revenue, excluding straight-line rental revenue adjustment             166 077       93 964     178 882      438 923   
Straight-line rental revenue adjustment                                 14 354       10 527      43 964       68 845   
Revenue                                                                180 431      104 491     222 846      507 768   
Property expenses                                                     (25 272)     (17 108)    (36 072)     (78 452)   
Net property income                                                    155 159       87 383     186 774      429 316   
Statement of financial position extracts                                                                               
Investment property opening balance                                  3 206 963    1 529 919   3 464 743    8 201 625   
Net additions, acquisitions, disposals and re-allocations              (5 482)        4 490      53 850       52 858   
Fair value adjustment and straight-lining                               14 354       10 527      43 964       68 845   
Fair value of investment property                                    3 215 835    1 544 936   3 562 557    8 323 328   

Notes to the consolidated condensed financial results

                                                                                Reviewed       Reviewed                
                                                                              Six months     Six months      Audited   
                                                                                   ended          ended   Year ended   
                                                                            30 September   30 September     31 March   
R'000                                                                               2016           2015         2016   
1   RECONCILIATION OF BASIC EARNINGS TO                                                                                
    HEADLINE EARNINGS                                                                                                  
    Total comprehensive income attributable to equity holders                    492 105        371 208    1 113 483   
    Less: Net fair value adjustment - investment property                              -              -    (241 437)   
    Profit on disposal of investment property                                   (10 624)        (2 630)     (13 568)   
    Headline earnings attributable to shareholders                               481 481        368 578      858 478   

2   FINANCIAL INSTRUMENTS
    Financial instruments held by the group include the investment in IAPF and derivatives. The valuation of IAPF is based on the closing
    share price times the number of shares held at the reporting date, which is a level 1 valuation. Derivative financial instruments hedge
    interest rate and foreign exchange risk. Interest rate hedging instruments are valued by discounting future cash flows using the market
    rate indicated on the interest rate curve at the dates when the cash flows will take place. Foreign exchange hedging instruments
    are valued by making reference to market prices for similar instruments and discounting for the effect of the time value of money.
    Derivatives are considered to be level 2 valuations.

    For cash and cash equivalents, trade and other receivables, trade and other payables, fixed rate loans and variable rate loans which are
    carried at amortised cost, the carrying value is a reasonable approximation of fair value.

                                                                                  Reviewed    Audited       Reviewed   
                                                                              30 September   31 March   30 September   
R'000                                                                                 2016       2016           2015   
3   INVESTMENTS                                                                                                    
    Investec Property Fund Limited ("The Fund") carries its investment in                                          
    IAPF at fair value.                                                            587 626    531 772        530 474   


4   FAIR VALUE ADJUSTMENTS OF INVESTMENT PROPERTY
    The Fund's policy is to value investment properties at year-end, with independent valuations performed on a rotational basis to ensure
    each property is valued at least every three years by an independent external valuer. The directors' valuation methods include the
    discounted cash flow model and the capitalisation model. Revaluations were not undertaken at the half year as directors are not aware
    of any factors that would materially affect the valuation of the properties.

5   RELATED PARTY TRANSACTIONS
    During the six months under review, there were no unusual or significant related party transactions. All related party transactions were in
    the ordinary course of business and consistent with those reported in the previous set of annual financial statements.

6   SUBSEQUENT EVENTS
    On 14 October 2016 the Fund repaid corporate bonds to the value of R85 million. On 25 October 2016, due to strong demand, the
    Fund increased its commercial paper to R241 million for a further three months at an attractive margin of 44bps above 3-month JIBAR.
    On 26 October 2016, AGCO, the last asset in the Griffin portfolio transferred to the Fund.

COMMENTARY

INTRODUCTION

Investec Property Fund Limited ("The Fund") is a South African Real Estate Investment Trust and currently comprises a portfolio of
119 properties in South Africa with a total gross lettable area ("GLA") of 1 280 711 m2 valued at R16.4 billion (March 2016: R16.5 billion) and
a R0.6 billion (March 2016: R0.5 billion) investment in Investec Australia Property Fund Limited ("IAPF").

The 2016 financial year was transformational for the Fund. It involved the acquisition of R8 billion of properties from Zenprop and Griffin,
which resulted in the doubling of the Fund's property portfolio by value and an increase in the number of assets by approximately 50%.

The focus of this interim period has therefore been on consolidating these acquisitions onto our management and reporting platforms in
order to ensure they are managed with the efficiency and intensiveness of the Fund's base portfolio.

The performance of the Fund for the interim period is once again characterised by the defensiveness of the portfolio as well as further
margin enhancement achieved through focused asset, cost and utility management.

FINANCIAL RESULTS

The board of directors is pleased to announce an interim dividend amounting to 60.91 cents per share for the period ended
30 September 2016 (30 September 2015: 59.63 cents per share). This represents growth of 2.2% when compared to the comparative
six-month period ending 30 September 2015. This growth results in an outperformance of the guidance provided to the market, which is
admirable considering the dilutionary impact of the Zenprop transaction where the larger impact is seen in the first half of FY2017.

The results reflect the Fund's hands-on asset management approach that has seen the Fund's base portfolio(1) deliver 9.1% net property
income growth year over year. The impressive performance of the base portfolio again demonstrates the quality and robust nature of the
Fund's portfolio especially given the continued low vacancy rate across the portfolio of 1.5% (March 2016: 1.1%). The Fund let or renewed
87% of space that expired or was cancelled in the period (102 010 m2) at a weighted average positive reversion of 2.7% and leaving only
38 339 m2 of rentable area to be let for the remainder of the year. The letting performance is testament to the quality of the property portfolio
and the desirability of the product and service offered to existing clients and the occupier market.

The Fund's internal focus has resulted in a further improvement of its operating margin through a reduction in its net cost to income ratio
to 15.7% (Sep 2015: 17.9%).This has been driven by a specific focus on utility and energy management. The Fund now has a dedicated
internal utility team which monitors:

- the timing and accuracy of billing by council;
- optimisation of utility tariffs; and
- efficiency of client consumption.

This initiative has resulted in improved returns for the benefit of the Fund and its clients, as well as optimising the long-term run rate of the
Fund's utility costs.

All acquisitions are broadly performing in line with budget. The Griffin portfolio is performing ahead of budget, whilst the Zenprop portfolio
is tracking slightly behind budget due to the vacancy of two restaurants at Design Quarter. A new restaurant at Design Quarter has been
secured for one of the vacant spaces, opening 1 December 2016. Zevenwacht and Newcastle Mall are both trading well with double and
high single digit turnover growth being achieved at both centres for the previous 12-month period.

(1) Base portfolio refers to R8.7bn of properties that have been held by the Fund for the entire comparative period.

PROPERTY PORTFOLIO

The Fund's current property portfolio consists of a diverse base of 119 quality properties with an average value per property of R137 million.

The portfolio's income stream is underpinned by contractual escalations of 7.8% and a strong tenant base which is demonstrated by
its base net property income growth of 9.1% for the first half of 2017. Vacancies across the office, industrial and retail portfolios are all
significantly below the IPD sector performance and remain as arguably one of the lowest in the sector overall with the portfolio closing at an
overall vacancy of 1.5%.

Receivables continue to be tightly managed and represent 1.0% of total collectables at 30 September 2016 (31 March 2016: 0.7%). Asset
managers continue to work with clients and strive to reduce the overall cost of occupation where possible. The Fund has agreed payment
plans with two of its clients consisting of 42% of the amount provided for, and is confident the full amount will be recovered. Provision for
bad debts covers all debtors greater than 60 days.

Portfolio                                                                 Total      Office   Industrial      Retail   
Number of properties                                                        119          34           47          38   
Asset value                                                             R16.4bn      R6.5bn       R3.8bn      R6.1bn   
GLA (m2)                                                              1 280 711     270 456      603 684     406 571   
Vacancy                                                                    1.5%        0.8%         2.3%        1.0%   
Cost to income ratio                                                      15.7%       14.2%        14.0%       18.5%   
WALE (years)                                                          3.5 years   3.7 years    3.6 years   3.1 years   
In-force escalations                                                       7.8%        8.1%         7.9%        7.4%   

LETTING ACTIVITY

The Fund began the period with an opening vacancy of 14 763 m2 or 1.1%; with 102 010 m2 expiring in the interim period. The Fund
has renewed or relet 91 169 m2 of the GLA that became available in the year. An additional 52 354 m2 of GLA1 becomes available during
the remainder of the year of which 14 016 m2 has already been let. In addition 6 029 m2 of opening vacancy was sold during the year.
The Fund's closing vacancy after disposals amounted to 19 575 m2 or 1.5%. The Fund does not anticipate any large letting risk in the next
six months.

                                       Expiries and   Gross expiry   Renewals/        Gross      Rental      Average   
                                       cancelations         rental    new lets   new rental   reversion   escalation   
YTD                                             GLA           R/m2         GLA         R/m2           %            %   
Office                                        8 356         169.61       7 914       169.79         0.1          8.2   
Industrial                                   61 463          42.11      50 428        40.38       (4.1)          8.2   
Retail                                       32 191       64.63(2)      32 827     71.76(2)     11.2(3)          6.8   
Subtotal                                 102 010(1)                     91 169                      2.7          7.5   
Early renewals(4)                            18 475          97.08      18 475        93.30    (3.9)(4)          7.0   
Total                                       120 485                    109 644                      1.1          7.4   

(1) Total expiries for FY2017 amount to 154 364 m2. At 31 March 2016, the Fund reported 99 506 m2 was expiring in FY2017. This was however shown net of
    54 858 m2 of early renewals already concluded.
(2) Rent per m2 is reduced by large big box renewal of 15 497 m2 at a rental of R14.01/m2, if excluded the expiry rental and new rental would be R110.60 and
    R123.59 respectively.
(3) Significant positive double digit reversion at shopping centres.
(4) During the period, the Fund has early renewed a large industrial lease that expired in FY2018, extending the lease by five years from original expiry.

The Fund's lease expiry profile remains robust and defensive with a WALE of 3.5 years by revenue. In the next financial year 93% of income
is contractual, albeit approximately 220 000 m2 becomes available in FY2018. The Fund engages its clients well in advance of any expiry to
understand their space requirements and is in ongoing discussions with them in this regard.

LEASE EXPIRY BY REVENUE

2017               2018               2019               2020               2021               April 2021 onwards
Industrial  0.6    Industrial  4.4    Industrial  3.8    Industrial  5.7    Industrial  1.5    Industrial  7.9
Office      1.0    Office      4.0    Office      8.8    Office      4.5    Office      6.4    Office     14.7
Retail      2.7    Retail      7.1    Retail      7.3    Retail      7.0    Retail      4.0    Retail      8.7
Total       4.3    Total      15.5    Total      19.8    Total      17.1    Total      12.9    Total      31.3

SECTORAL PERFORMANCE

Office
The Fund's office portfolio is well located in strategic sought after nodes and currently is 99% let with a WALE of 3.7 years and thus is well
placed to temper the oversupply in the sector; particularly in nodes such as Sandton that continue to see the new developments coming to
market at very competitive rentals.

In the first six months of the year, 8 356 m2 became available, of which 95% (7 914 m2) was renewed or let to new clients at a positive
reversion of 0.1%. A further 10 853 m2 becomes available before year-end, of which 51% has already been renewed. This demonstrates
the high contractual nature of the portfolio's income stream. The Fund's strategy to acquire office buildings in strategic sought after nodes
is becoming more evident as the Fund's portfolio is able to deliver returns in excess of the current office market with a portfolio vacancy
of 0.8%, supported by a WALE of 3.7 years. The portfolio is defensive and continues to demonstrate its resilience in nodes of particularly
high oversupply.

Looking forward to the next 12-24 months, with the increase in office supply and benign client demand, without an increase in economic
growth which will increase the depth of the office tenant market, it is going to be challenging for the Fund to maintain its current low office
vacancy performance.

Industrial
The industrial sector continues to experience tenant reluctance to commit to longer term leases as a result of the tough economic
environment that faces the sector. The manufacturing sector in particular is under significant pressure due to international competition and
high import costs due to Rand weakness and continues to see clients exit the market or consolidate their facilities.

The market has also seen a marked increase in incentives (rent free, cash and/or installation allowances) due to increased competition in
line with international trends. Competition from new developments has increased significantly as developers appear willing to conclude
deals on sub-economic returns. Clients have an increased cost focus as result of subdued revenue growth and standing clients are seeking
assistance in reducing cost of occupation (mostly driven by municipal costs).

Despite all of the above the Fund's industrial portfolio continues to demonstrate its defensiveness; in the first six months of FY2017, the
Fund was able to let 50 428 m2 of 61 463 m2 that become available with a negative reversion of 4.1% and strong contractual escalations
of 8.2%. The letting relates to the renewal and new letting of two tenants occupying 37 263 m2 at Alrode Multipark. This was a significant
milestone in the competitive market, representing total revenue of R17.8 million per annum.

Vacancy for the period increased marginally to 2.3% (March 2016: 1.4%), which is largely attributable to the vacancy of a 8 450 m2
warehouse in Epping. (This facility has now been let effective 1 November 2016). Much of the letting success in the period can be attributed
to a thorough understanding of existing clients' requirements and a willingness to work with them in order to obtain a positive outcome for
both the client and the Fund.

In FY2018 127 289 m2 becomes available. The Fund's industrial buildings are well located, functional and reasonably priced properties. 
The Fund has engaged with clients early to understand their requirements and is in ongoing negotiations in respect of the space.

Retail
The Retail portfolio comprises retail assets that are either dominant in their respective node or are niche in relation to a specific product
offering or category. There is a focused strategy of maintaining a minimum average of national retailers to ensure the assets are able to
trade through periods of subdued economic and consumer spend. The current percentage of national retailers across the portfolio is
approximately 80%.

The Fund continued to achieve above average reversions with 11.2% on new lets and renewals despite the high percentage of
nationals and also has maintained an in-force escalation of 7.4%. This has been driven by the growth profile in trade achieved in the
Fund's shopping centres.

In FY2018 68 553 m2 becomes available, the Fund continually engages with nationals and other retailers to understand the requirements.

TURNOVER GROWTH OF SHOPPING CENTRE REGIONS AT 30 SEPTEMBER 2016

Gauteng         9%   
Western Cape   13%   
Kwazulu Natal   8%   
Limpopo        16%   
Mpumalanga     -3%   
Free State     13%

Despite difficult economic conditions in the last 12 months, the Fund's retail malls have performed well. Turnover growth at Musina Mall in
Limpopo remains high despite the existing challenges with border control regulations in Zimbabwe. Mpumalanga depicts low growth due to
increased consumer pressure and stagnated growth in the coal mining town of Kriel. Despite the subsued turnover growth Kriel achieved
positive reversions of 16.1%.

Subsequent to the Edcon restructure, Edcon provided landlords a more detailed plan in respect of potential store closures and capex plans.
Edcon has confirmed it intends closing 10% of its stores where cost of occupation exceeds a threshold. A capital contribution will also
be requested for certain existing stores to upgrade and revamp. The Fund is in specific discussions with the Edcon Group relating to the
status of each of its stores. The Fund has engaged these discussions on a portfolio basis and expects the outcome to have an immaterial
impact at a Fund level, with no store closures expected at this point in time.

SUSTAINABILITY

Sustainability is a key area of focus for the Fund which involves improving the stability of electricity and water supply for clients while
attempting to manage the increasing cost of occupation where possible. The focus on the accuracy of council billing and rolling out of
measurement tools for water and electricity usage in the form of bulk check meters are some of the initiatives implemented to date. 100% of
the portfolio will have bulk check metres installed by June 2017.

The Fund introduced a pilot project on the rooftop at Fleurdal Mall in Bloemfontein. The project went live on 1 November 2016. The project
aims to reduce the cost of electricity by creating its own solar power (946 kwh). It also provides grid stability and energy security and will
alleviate down time for clients in the event of load-shedding. This project offers an attractive yield over its repayment profile and has resulted
in the roll-out of a similar project at another of the Fund's retail shopping centres, namely Musina Mall. The project will continue to be rolled
out across feasible buildings and assist in reducing the cost base of the Fund as well as the cost of occupation for clients.

SECTORAL SPREAD
Revenue
39%   Office
24%   Industrial
37%   Retail

SECTORAL SPREAD
Asset value
40%   Office
23%   Industrial
37%   Retail

GEOGRAPHICAL SPREAD
Revenue
6%    Free State
66%   Gauteng
12%   KZN
2%    Limpopo
2%    Mpumalanga
11%   Western Cape
1%    Other

CAPITAL EXPENDITURE AND REDEVELOPMENT

The Musina Mall extension
The Fund has partnered with The Moolman Group ("Moolman") (2/3 IPF/1/3 Moolman) to extend Musina Mall by a further 21 323 m2 for a
total value of R332 million (IPF share R221 million). The project is progressing in line with budget and is on track for opening on 1 April 2017.
The redevelopment provides the Fund a development yield of above 9% in year one and is 88% pre-let.

Musina is a vibrant commercial and trading centre in the northern part of the Limpopo province, servicing both the surrounding agricultural
sector and in particular the cross-border trade from Zimbabwe. The centre is located close to the Beit Bridge border and although there has
been some level of disruption due to the challenges that have arisen out of the regulation of border control in Zimbabwe, turnover growth at
the centre was only marginally affected.

The project will create a semi-regional centre in Musina and has resulted in an attractive capital profit on the one third sale as well as the
yield enhancement through the two thirds investment in the development. There are minimal opportunities to acquire assets of this type of
quality and size at the development yield.

CAPITAL ALLOCATION

As highlighted at year-end, the Fund is focused on ensuring that it is optimising long-term shareholder returns by allocating and investing
capital into value enhancing assets.

To this end, the Fund has sold three buildings and 1/3 of Musina Mall during the period for R211.6 million (profit on sale R10.6 million*) with
further disposals planned this year. Two of the properties sold were industrial properties that no longer met the investment criteria and profile
of the Fund and the third was a dealership where the client exercised an early acquisition option at an attractive yield of 7%.

The Fund continuously and rigorously assesses the current portfolio and evaluates performance over the medium to long term.

* The profit on sale excludes R6.3 million of valuation uplift recognised in FY2016 of the disposal of 1/3 stake of Musina Mall.

INVESTMENT IN IAPF

The Fund continues to find Australia as an investment destination and the quality of IAPF's asset base and performance attractive. IAPF
continues to deliver on its investment objectives and the Fund will likely continue to support IAPF and increase its investment at current
pricing levels where the opportunity arises.

The Fund's investment in IAPF amounts to R588 million, representing 12.4% of IAPF (March 2016: 12.3%); and amounts to 3.5% of the
Fund's balance sheet. The Fund currently holds 39 967 734 shares in IAPF. Income growth in the hands of the Fund (in ZAR) equated to
11% for the period.

The Fund manages its exposure to exchange rate risk on its distributions received from IAPF by actively hedging future income from IAPF
through taking out forward exchange rate cover. The Fund has hedged approximately AUD$3.2 million of income to December 2018 at
exchange rates ranging between R10.07 and R13.76 /AUD $.

BALANCE SHEET AND RISK MANAGEMENT

Balance sheet and risk management is a fundamental focus area for the business. In the current volatile and unpredictable environment it is
paramount that the Fund has certainty on its sources of funding and cost of funding. The Fund adopts a conservative approach to both of
these measures.

The active and efficient interest rate risk management strategy is evident in the Fund's current average cost of funding of 9.1%
which is underpinned by a current hedged position of 81%, a debt and swap maturity of 3.7 years and 3.1 years respectively (March 2016:
3.9 years and 3.6 years). The Fund continues to monitor the market and restructure its interest rate swap book when the opportunity
presents itself.

During the period the Fund has:

- rolled R150 million of the commercial paper for a further three months at an attractive margin of 45 basis points; and
- repaid R40 million of corporate bonds with cash.

The Fund has also entered into a new thee-year debt facility with Standard Bank for R300 million on an unsecured basis at a margin of
162 basis points above three-month JIBAR and refinanced the Investec bridge facility with an unsecured R300 million headroom facility with
Standard Bank at prime less 160 basis points.

In line with its objective of mitigating refinance risk, the Fund negotiated an early refinancing of R450 million of bank facilities that
has extended the expiry of two facilities by circa 2.5 years. The two facilities were due to mature in October 2016 (R250 million) and
August 2017 (R200 million).

Post period-end, the Fund also repaid bonds to the value of R85 million using existing cash and due to strong demand, increased its
commercial paper to R241 million for further three months at a rate of 44 basis points above three-month JIBAR. The Fund's paper
continues to be well supported.

DEBT EXPIRY PROFILE

FY17      FY18       FY19       FY20       FY21       FY22      FY23      FY24   FY25   FY26
Debt  3   Debt  15   Debt  14   Debt  22   Debt  22   Debt 12   Debt  8   0      0      Debt 4  
Swaps 1   Swaps 12   Swaps 25   Swaps 28   Swaps 22   Swaps 9   Swaps 3       

SOURCES OF DEBT CAPITAL

3%    Commercial paper
39%   Corporate bonds
58%   Bank debt

CORPORATE RATING

The Fund's corporate rating was maintained at A(ZA) with a stable outlook in August 2016 whilst the secured rating was reaffirmed and
released in April 2015 as AA-, with stable outlook reinforcing the Fund's balance sheet strength.

CHANGES TO THE BOARD

Following the retirement of Graham Rosenthal from the Board on 16 August 2016, shareholders were advised that Philip Hourquebie had
been appointed as an independent non-executive Director with effect from the same date. Phillip was also appointed as Chairman to the
Audit and Risk Committee.

Phillip is a member of the South African Institute of Chartered Accountants (SAICA) with over 38 years of experience at the multinational
professional services firm, EY (formerly Ernst & Young). Between 2010 and 2014 he served as the Regional Managing Partner, Central &
South Eastern Europe, for EY and prior to that he was the Regional Managing Partner, sub-Saharan Africa and CEO South Africa.

PROSPECTS AND GUIDANCE

The interim dividend of 60.91 cents per share exceeds market consensus and the guidance provided in the FY2016 results announcement.

The dividend guidance indicated that the dividend for the full year ending 31 March 2017, would be flat. The expectation was, however, for
H1 to be slightly dilutive due to the comparative for H1 FY2016 not including any of the dilutionary impact for Zenprop. The outperformance
of 2.2% was generated by the base portfolio, IAPF and the acquisitions performing in line with budget.

As a result the Fund expects the growth in dividend per share for the full year to 31 March 2017 to be similar to growth reported in the
interim period.

The growth in dividend per share will normalise to historical levels for the period ending 31 March 2018.

This forecast is based on the assumption that over the course of the next 12 months, no further local or offshore acquisitions are concluded,
the macroeconomic environment will not deteriorate markedly, no major corporate failures will occur, budgeted renewals will be concluded,
that clients will be able to absorb the recovery of rising rates and utility costs and that the ZAR/AUD exchange rate will remain at similar
levels to the current levels. Budgeted rental income was based on contractual escalations and market-related renewals.

The information and opinions contained above are recorded and expressed in good faith and are based upon sources believed to be
reliable. No representation, warranty, undertaking or guarantee of whatever nature is made or given with regards to the accuracy and/or
completeness of such information and/or the correctness of such opinions.

This forecast has not been reviewed or audited on by the Fund's independent external auditors.

On behalf of the Board of Investec Property Fund Limited

Sam Hackner                                                            Nicholas Riley
Non-executive Chairman                                                 Chief Executive Officer

16 November 2016

BASIS OF ACCOUNTING

The reviewed interim condensed consolidated financial information for the six months ended 30 September 2016 has been prepared in
compliance with International Financial Reporting Standards ("IFRS"), the presentation and disclosure requirements of IAS 34, Interim
Financial Reporting, the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by The Financial Reporting Standards Council, the Companies Act, (71 of 2008, as amended) of South Africa
and the JSE Listings Requirements.

The accounting policies applied in the preparation of the results for the six months ended 30 September 2016 are consistent with those
adopted in the financial statements for the year ended 31 March 2016, other than the adoption of those standards that became effective
in the current period, which had no impact on the financial results. These reviewed interim condensed consolidated financial statements
have been prepared under the supervision of Andrew Wooler, ACA.

REVIEW CONCLUSION

Ernst & Young Inc., the Fund's independent auditors, have reviewed the consolidated statement of comprehensive income, consolidated
statement of financial position, condensed consolidated statement of cash flows, condensed consolidated statement of changes in
equity, condensed consolidated segmental information and notes to the consolidated condensed financial results, as set out on 
pages 1 to 4 of the interim condensed consolidated financial results, and have expressed an unmodified review conclusion. A copy of their review
conclusion is available for inspection at the company's registered office.

INTERIM DIVIDEND

Notice is hereby given of the declaration of interim gross dividend number 12 ("Cash dividend") of 60.91090 cents per share for the
period 1 April 2016 to 30 September 2016.

Other information:

- The dividend portion has been declared from income reserves.
- A dividend withholding tax of 15% will be applicable on the dividend portion to all shareholders who are not exempt.
- The issued share capital at the declaration date is 700 228 202 ordinary shares of no par value.

In accordance with Investec Property Fund's status as a REIT, shareholders are advised that the dividend meets the requirements of a
'qualifying distribution' for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962 ("Income Tax Act"). The dividends on the
shares will be deemed to be dividends for South African tax purposes in terms of section 25BB of the Income Tax Act.

TAX IMPLICATIONS FOR SOUTH AFRICAN RESIDENT SHAREHOLDERS

Dividends received by or accrued to South African tax residents must be included in the gross income of such shareholders and will
not be exempt from the income tax in terms of the exclusion to the general dividend exemption contained in section 10(1)(k)(i)(aa) of the
Income Tax Act because they are dividends distributed by a REIT. These dividends are, however, exempt from dividend withholding tax
("Dividend Tax") in the hands of South African resident shareholders provided that the South African resident shareholders have provided
to their CSDP or broker, as the case may be, in respect of uncertificated shares, or the Fund, in respect of certificated shares, a DTD(Ex)
(Dividend Tax: Declaration and undertaking to be made by the beneficial owner of a share) form to prove their status as South African residents.

If resident shareholders have not submitted the abovementioned documentation to confirm their status as South African residents, they
are advised to contact their CSDP, or broker, as the case may be, to arrange for the documents to be submitted prior to the payment of
the dividend.

TAX IMPLICATIONS FOR NON-RESIDENT SHAREHOLDERS

Dividends received by non-resident shareholders from a REIT will not be taxable as income and instead will be treated as ordinary
dividends which are exempt from income tax in terms of the general dividend exemption section 10(1)(k) of the Income Tax Act. It should
be noted that up to 31 December 2013 dividends received by non-residents from a REIT were not subject to Dividend Tax. With effect
from 1 January 2014, any dividend received by a non-resident from a REIT will be subject to Dividend Tax at 15%, unless the rate is
reduced in terms of any applicable agreement for the avoidance of double taxation ("DTA") between South Africa and the country of
residence of the non-resident shareholder. Assuming Dividend Tax will be withheld at a rate of 15%, the net amount due to non-resident
shareholders is 51.77427 cents per share. A reduced dividend withholding rate in terms of the applicable DTA may only be relied on if
the non-resident shareholder has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated
shares, or the Fund, in respect of certificated shares:

- a declaration that the dividend is subject to a reduced rate as a result of the application of the DTA; and
- a written undertaking to inform the CSDP, or broker or the company, as the case may be, should the circumstances affecting the
  reduced rate change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by the Commissioner of
  the South African Revenue Services.

If applicable, non-resident shareholders are advised to contact the CSDP, broker or the Fund, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the dividend if such documents have not already been submitted.

Summary of the salient dates relating to the Cash Dividend:                            
                                                                                  2016   
Last day to trade ("LDT") cum dividend                             Monday, 12 December   
Shares to trade ex dividend                                       Tuesday, 13 December   
Record date                                                      Thursday, 15 December   
Payment date                                                       Monday, 19 December   

Note:
   
1. Shares may not be dematerialised or rematerialised between commencement of trade on Tuesday, 13 December 2016 and close of
   trade on Thursday, 15 December 2016.

Investec Bank Limited
Company Secretary

16 November 2016

Company Information

Directors
S Hackner (Chairman)#
SR Leon (Deputy Chairman)#
N Riley (Chief Executive Officer)
A Wooler (Financial Director)
LLM Giuricich#
S Mahomed#*
CN Mashaba#*
MM Ngoasheng#*
GR Rosenthal#*^
KL Shuenyane#*
P Hourquebie #*+

# Non-executive
* Independent
^ Retired 16 August 2016
+ Appointed 16 August 2016

Investec Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2008/011366/06)
Share code: IPF   ISIN: ZAE000180915
(Income tax reference number 9332/719/16/1)

Registered office
C/o Company Secretarial, Investec Limited
100 Grayston Drive, Sandown, Sandton, 2196

Transfer secretary
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001

Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196



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