Investa Office Fund (ASX:IOF)

Jonathan Callaghan
Market Cap (AUD): 3.34B
Sector: Real Estate
Last Trade (AUD): 0 +0 (+0%)
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1. About

Investa Office Fund (IOF) is an externally managed ASX-listed real estate investment trust (A-REIT) included in the ASX100 index. IOF’s principal activity is being an owner of investment grade office buildings receiving rental income from a tenant register comprising predominantly government and blue chip tenants. IOF has total assets under management of $4.4 billion, with 20 investments located in core CBD markets throughout Australia.


2. Business model


The Company operates the following divisions:[1]



Revenue ($M)

% of Total Revenue

% of Profit (before Tax)

Profit drivers[2]

Rental Revenue




IOF delivered a net profit attributable to unitholders for the year ended 30 June 2018 of $521.6million, up10.6% from the previous year. The increase was primarily due to the fair value gain of investment properties and derivatives being $45.9 million and $41.1 million higher than the previous year respectively

Interest Income




3. Strategy


Key strategies include:[3]


Business strategies

To deliver attractive risk-adjusted returns investing in high quality Australian investment grade office buildings by leveraging IPG’s fully integrated specialist property Management Platform to outperform. This will be achieved by:

  • active management of the property portfolio to drive income and capital returns
  • identifying and implementing value add and development opportunities to create high quality investment properties
  • enhancing the property portfolio quality, scale and diversification with selective acquisitions and divestments
  • applying an active approach to capital and risk management
  • ensuring best in class responsible investment (environmental, social and governance)

4. Markets


The Company operates in markets including:[4]


Industry  (Australia)

Industry Revenue (2018)

Annual Growth Rate (14-19)

Financial Assets Investing

$13 billion


5. Competition


Major competitors include[5]


  • Charter Hall Retail REIT (ASX:CQR)
  • Cromwell Group (ASX:CMW)
  • Shopping Cntrs Austrls Prprty Gp Re Ltd (ASX:SCP)
  • BWP Trust (ASX:BWP)

6. History



The Armstrong Jones Office Fund began as an unlisted property trust



First listed and managed by Armstrong Jones Management Limited (part of Armstrong Jones)



Armstrong Jones and its related entities were later purchased by Mercantile Mutual



Mercantile Mutual, the parent company of Armstrong Jones, acquired Heine Management Limited



Mercantile Mutual and its subsidiaries underwent a change of name to ING. In alignment with this name change the Armstrong Jones Office Group was renamed the ING Office Fund (ASX:IOF)



ING made the decision to sell the management rights of IOF to Investa Property Group resulting in a change of the Responsible Entity which was approved by unitholders. In line with the transfer ING Office Fund was renamed the Investa Office Fund



Acquisition of 66 St. George's Terrace, Perth



Acquisition of 99 Walker Street, North Sydney

Acquisition of 567 Collins St in Melbourne  



Acquisition of Piccadilly Complex, IOF US$200m US Private Placement

IOF Acquires 6 O'Connell Street, Sydney



IOF Secured 31% premium on sale of 383 La Trobe St



Cromwell Property Securities Limited as responsible entity for Cromwell Diversified Property Trust acquired a relevant interest in 9.83% of IOF units

Acquisition of 50% interest in Coles Headquarters Melbourne for $140.5m



A$150 million Inaugural Green Bond Issue



Investa Office Fund to be removed from the S&P/ASX 200 Index

7. Team


Board of Directors[7]


Investa Listed Funds Management Limited (ILFML)


Richard Longes – Chairman and Non-Executive, Independent Director, ILFML

John Fast – Non-Executive, Independent Director, ILFML

Robert Seidler – Non-Executive, Independent Director, IOMPL and ILFML

Geoff Kleemann – Non-Executive, Independent Director, ILFML

Gai McGrath – Independent Director, ILFML​[8]


Investa Wholesale Funds Management (IWFML)


David Baffsky – Chairman and Independent Director, IWFML

Dennis Wildenburg – Non-Executive, Independent Director, IOMPL and IWFML

James Evans – Non-Executive, Independent Director, IWFML

Jonathan Callaghan – Executive Director IOMPL, ILFML, IWFML, and Chief Executive Officer, Investa

Peter Menegazzo – Executive Director IOMPL, IWFML and Chief Investment Officer, Investa


Management Team


Michael Cook – Group Executive, Investa

Jason Leong – Group Executive, Fund Manager, ICPF

Penny Ransom – Group Executive, Fund Manager, IOF

Ivan Gorridge – Chief Financial Officer, Investa

Sally Franklin – Group Executive, Real Estate Services & Business Operations, Investa

Mark Tait – Group Executive, Head of Commercial Development, Investa

Emily Lee-Waldao – General Manager, Marketing & Communications, Investa

Shaun Condon – General Manager, Environment & Safety, Investa

Neal Noble – Chief Information Officer, Investa

Amy Wild – General Manager, People & Culture, Investa

Andrew Murray – Group General Counsel

David Cannington – Head of Research & Strategy, Investa

Katrina Newcombe – National Head of Asset Services, Investa

Paul Vandervlis – General Manager, Facilities Services, Investa

Nina James – General Manager, Corporate Sustainability, Investa

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8. Financials


2018 Full Year Results Presentation


Financial Year 2017/18 (ended 30 June):[9]



Revenue ($’M)

% Change

Profit (before Tax)($’M)

% Change

Property Revenue





Interest Income










9. Risk


Major risks include:


Material risks[10]


Market cycle

Economic growth and the economic environment present risks to tenant vacancies, the property valuation cycle, the availability of funding, interest rates, and foreign exchange rates.


Vacancy levels

The level of vacancy can impact rental returns and the market value of office property. A high vacancy level is likely to result in lower income returns and place downward pressure on property values.


Property valuation cycle

Conditions prevailing in the general economic environment and the property investment markets affect the value of property investments. Declining property values increase IOF’s gearing levels, which may increase the risk of a breach of financial covenants.


Availability of funding

The availability of funding can impact liquidity and:

  • the ability to invest in both the existing property portfolio and/or attractive acquisitions
  • the ability to refinance maturing debt facilities


Interest rates

The movement of interest rates can affect the amount of interest payable as well as impact investor sentiment towards property assets and hence, market values. Higher interest rates typically increase interest costs and may reduce investment demand for property assets, while low-interest rates typically reduce interest costs and can encourage increased investment activity.


Exchange rate risk

There is a risk that the movement in currency exchange rates will increase the payments due and the level of debt denominated in foreign currencies.


Market Risk


Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The primary objective of interest risk management is to manage the potential for financial loss measured in terms of impact on earnings arising from unfavourable movements in interest rates.IOF’s main interest rate risk arises from borrowings. Borrowings issued at variable rates expose IOF to cash flow interest rate risk. IOF’s preference is to protect itself from large and rapid movements in financial markets, to achieve a less volatile exposure to movements in interest rates through prudent risk management techniques. IOF’s policy is to hedge forecast borrowings using interest rate derivatives, based on hedge ratio range limits.


Foreign exchange risk

Foreign exchange risk is the risk that the value of a financial commitment, asset or liability will fluctuate due to changes in foreign exchange rates. IOF’s foreign exchange risk arises from borrowings in USD in the form of USPPs. IOF mitigates its exposure to the foreign exchange risk inherent in the carrying value of its USPPs by entering into cross currency swap contracts. These convert 100% of the USD denominated principal outstanding and related finance costs to Australian dollar (AUD) exposures.


Credit Risk

Credit risk refers to the risk that a counterparty is unable to pay amounts in full when due and defaults on its contractual obligations resulting in a financial loss to IOF. Credit risk for IOF arises from cash and cash equivalents, receivables and derivative financial instruments. The maximum exposure to credit risk at the end of the reporting period is the carrying amounts of each class of financial assets included in the Consolidated Statements of Financial Position.


Liquidity Risk

Liquidity risk is the risk that IOF will not be able to meet its financial obligations or other cash outflows, as they fall due, because of a lack of liquid assets or access to adequate committed credit facilities. Management of liquidity risk is carried out by the Responsible Entity and IOF’s risk management policy sets a target for the level of cash and available undrawn debt facilities to cover future committed expenditure in the next year, loan maturities within the next year and an allowance for unforeseen events such as tenant default. IOF measures the risk by ascertaining its cash requirements regularly through cash flow forecasts. Refinancing risk, a form of liquidity risk, is the risk that credit is unavailable or available at unfavourable interest rates and credit market conditions resulting in an unacceptable increase in IOF’s interest cost. IOF manages this risk by refinancing borrowings in advance of the maturity of each borrowing, staggering maturity dates, and securing long term facilities, where appropriate and consistent with IOF’s strategy.


  1. ^ Annual Report 2018, P. 19
  2. ^ Annual Report 2018, P. 8
  3. ^ Annual Report 2018, P.06
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  9. ^ Annual Report 2018, P. 19
  10. ^ Annual Report 2018, P. 7, 39-41