Inospace, South Africa's largest private owner and operator of multi-let industrial property, has completed over R545m of asset disposals since the start of the year as part of a long-running capital recycling strategy that funds the group's acquisition pipeline. Each disposal was concluded at a premium to book value.
The Inospace investment model is built on three principles: the optimisation of existing assets, the lifting of yields through active asset management, and the recycling of mature properties into new value-add opportunities. The group has run a sectionalise-and-sell model since inception.
The strategy has produced two distinct exit routes. The first is the outright disposal of business parks to corporate investors or private buyers. The second is the sectionalisation of larger industrial parks into individual units sold to small investors and SME owner-occupiers. The latter has been the standout this year.
The largest of the sectional title schemes is Creation Works in Montague Gardens, Cape Town, acquired for R119m and selling at a total sell-out value of R205m. The group says 61% of units transferred in the first three months, with the balance scheduled for transfer in the next quarter. Plantation Works in Edenvale, Johannesburg, generated R52m with all units sold. Fly Works at Airport Industria sold out at R55m, following the full sell-out of Sky Works in the same node at the end of last year. Wynberg Works in Sandton completed a R22.8m sale of its final units after the scheme had stalled when road conditions in the node deteriorated, with demand returning once infrastructure was repaired ahead of the G20 conference. Metro Works on Johannesburg's West Rand also completed final unit sales.
Outright park disposals include Ship Works in Paarden Eiland for R98m, Prima Works in Epping Industria for R60m and Island Workshops, also in Paarden Eiland, for R25m. The group sold vacant land at the Bellville Triangle in Cape Town for R34m and disposed of Jet Exchange in Jet Park, Johannesburg.
Inospace Chief Executive Rael Levitt said the disposals reflected a deliberate discipline in the group's investment model rather than a response to market conditions.
"These disposals at a premium to book value allow us to capitalise on demand and continue to crystallise returns from our mature portfolio. They also provide us with further flexibility to recycle capital into new opportunities within our existing portfolio, as well as into our pipeline of acquisitions. We have run a sectionalise-and-sell model since inception. Our strategy is to optimise existing assets, drive up yields and recycle mature properties," Levitt said.
The sectional title sell-outs are executed through a technology-enabled sales and marketing platform developed under the group's LISA system. The platform generates and qualifies investor and tenant leads, manages the sales pipeline and tracks transfer progress. Inospace has applied the same model at Creation, Plantation, Fly and Wynberg, with Peer Works being explored as the next candidate.
Levitt said the buy-side appetite for the group's sectional title product had matched the strength of its leasing demand.
"Demand for small industrial units is as high as our leasing demand. We have built a strong investor platform for buyers of smaller units. Cape Town has shown the greatest appetite, with sales achieving yields of around 7% and prime areas commanding up to R12,000 per square metre."
Inospace has set a target of acquiring over R1bn of industrial assets in the current financial year. The disposal programme is the funding mechanism. Multiple acquisitions are in active due diligence, with the group focused on under-managed parks where its internal operating platform can drive occupancy, rental growth and capital value.
"We are targeting over R1bn of acquisitions in the current financial year. The disposals we have completed are the war chest that funds that ambition. Asset trading is very much part of our strategy. It is how we keep the portfolio fresh, lift overall returns and stay focused on the value-add segment of the market where our operating platform delivers," Levitt said.
Inospace operates more than 50 industrial parks with over 2,100 SME tenants across Cape Town and Johannesburg. Levitt founded the group in 2012, and it today owns and manages assets of over R3 billion.
