INVESTEC PROPERTY FUND LIMITED - COVID-19 and Edcon Update

COVID-19 and Edcon Update

INVESTEC PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Reg. No: 2008/011366/06)
Approved as a REIT by the JSE
Share Code: IPF
ISIN: ZAE000180915
("Investec Property Fund" or "the Fund")


COVID-19 AND EDCON UPDATE


COVID-19

The Fund is actively and intensely keeping abreast of the global COVID-19 pandemic, the commercial and trading
impact of which is set out below.

The Fund’s management team are engaged daily with tenants on a hands-on and one-on-one basis as required in
what is obviously a fluid and unprecedented operating environment. Appropriate risk mitigation measures, based
on best practice and in consultation with our specialist service providers, have been put in place throughout the
business. Our priority is to ensure the health and safety of all our stakeholders, whilst ensuring we continue to
deliver sustainable long-term returns for investors.

As with other landlords, IPF has seen the first economic impacts of the lockdown on our tenants in the April
collection rates, and the value of rental concession requests received as a value of annual contracted revenue by
region. These concession requests do not specifically relate only to April rental as some tenants have requested
relief covering more than one month. A summary is set out below by region.

                                                                                Concessions
                                          Concession
                                       requests as %
                                       of contracted
                     April rental    annual regional                                                      % Under
                    collection %             revenue           % Accepted(1)         % Denied(1)           review(1)

 South Africa              71%(2)              9%                 27%3                  4%                 69%(3)
                     (Office 87%,
                        Industrial
                      79%, Retail
                             56%)

 Europe                      83%(4)            33%                 33%(5,6)            15%6                 44%(6)

 UK                          87%                1%(7)                  -                 6%                   94%

Notes:
  1. As % of concessions requested
  2. Of the remaining 29% uncollected to date, 8% relates to tenants which have requested concessions and
       the balance largely attributable to rent payable by national retailers, the payment terms of which are still
       being negotiated
  3. Comprised of rental discounts granted (14%) and deferrals (13%). The rental discounts have largely only
       been provided to SMME retailers. Rental deferment structures range from 1-3 months of net rental
       deferment with payback periods of 3-6 months with interest accruing on the outstanding balance. Of the
       concessions under review, materially all of these concession requests relate to rental deferment relief and
       not discounts.
  4. Of the remaining 17% uncollected to date, 3.5% is due to a tenant insolvency, 10% are tenants which have
       requested concessions, 3.5% where communications with tenants have not led to any concession being
       requested and the balance attributable to home working restrictions - these tenants have noted
       administrative difficulties in making payments
  5. Comprised all deferrals and change from quarterly to monthly payments (8%). Rental deferment structures
       range from 1-3 months net rental with recoupment by 31 December 2020
  6. The balance of 8% relates to one tenant who has since entered bankruptcy proceedings
  7. Based on annualised April rental collection experience

South Africa

In South Africa as in other international markets, retailers are expected to be most heavily impacted over the coming
months because of restrictive Government regulations in response to Covid-19. 83% of the South African retail
portfolio is comprised of national tenants with the balance comprised of smaller independent retail businesses that
are more likely to be negatively impacted, thus a very nominal portion of the SA balance sheet is considered to be
“at risk”.

Going forward, the Fund expects income loss to some extent in the short-term arising from the relief offered to
small, medium and micro enterprises (SMMEs) and non-essential businesses in the retail sector based on
guidelines proposed by the South African Property Industry Group. Discussions with these national and regional
retailers are ongoing. Providing adequate support to SMMEs through the current volatility has been the focus of
IPF’s relief initiatives to date and the Fund has worked with its tenants to provide as much relief as possible across
all sectors.

Europe

In Europe, performance has been constrained by travel restrictions and the closing of national borders, however
there is still movement of goods and people, albeit at a slower pace. There has been consensus in European media
that the logistics sector is to profit, at least from an occupational perspective, from an expected uptick in e-
commerce and supply chain reconfiguration.

Concessions have typically been negotiated together with an extension of existing leases. Other concessions
offered include bringing forward future rent-free periods and adjustments to frequency of payment periods i.e. from
quarterly to monthly.

UK

The Fund’s UK portfolio is 66% retail by asset valuation with 38% underpinned by supermarkets and 28% being
retail warehousing. A total of 61% of the UK tenant base comprises essential services.

The majority of concessions being negotiated are in respect of an adjustment to payment periods and there has
been no income loss to date.


EDCON

Shareholders are referred to the announcement released by the Edcon Group (“Edcon”) on 29 April 2020 relating
to Edcon’s intention to file for business rescue.

Edcon is a tenant across 6 of the Fund’s retail properties (excluding Musina Mall, which the Fund has entered into
an agreement to dispose of), with GLA exposure of approximately 15,900sqm (1.4% South African GLA). In respect
of the restructuring implemented by Edcon in June 2019, IPF elected to contribute to the restructure via the reduced
rental option and had anticipated a reduction in rental income of approx. R9.8m commencing on 1 May 2019. As a
result, Edcon constitutes a nominal portion of the Fund’s income, representing 0.9% of total SA revenue and 0.6%
of Group revenue on a proportionally consolidated basis.

Furthermore, the Fund has alternative leasing strategies in place in respect of space currently occupied by Edcon
and has been working with architects to develop options around reconfiguring these spaces to minimize any
potential vacancy. As such, Edcon’s decision to commence business rescue proceedings is expected to have a
limited impact on the Fund.


Investec Property Fund Limited
Johannesburg


06 May 2020

Sponsor: Investec Bank Limited

Date: 06-05-2020 03:25:00
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