Growthpoint in talks with city on auction payment

SA’s largest real estate company, Growthpoint Properties, says it is holding meetings with the City of Cape Town following allegations that it took about R140m from the city by underpaying for land on the Foreshore.

The company, which owns R17.2bn worth of assets in the city, bought a parcel of land with attached development rights in September 2016 at a public auction for R86.5m, beating at least 20 bidders, Growthpoint CEO (SA) Estienne de Klerk said.

Land justice NGO Ndifuna Ukwazi said the city should have sold the land, known as site B, and attached rights for about R227.3m. It said while Growthpoint paid about R5,000/m² for the 4,000m² piece of land and 17,500m² for development rights, there was potential for 46,000m² of development rights. Thus the company paid R1,880/m², not R5,000/m².

“We are engaging directly with the city regarding this property, which we acquired through a public auction with a vision to create a precinct together with two neighbouring office properties that we already own,” De Klerk said.

He said given the number of bidders, a fair price was likely to have been paid.

Growthpoint was a major investor in the city, he added, paying R500m in rates and taxes annually. Other than the R17.2bn of property it owned directly, it also held 50% of the V&A Waterfront, which is valued at about R10bn.

De Klerk said the company would continue to engage with the city, town planners and other professionals to ensure processes were correctly followed and to ascertain if more funds need to be paid to the city.

Mayoral committee member for assets and facilities management Stuart Diamond said Growthpoint had a right to submit applications to enhance the value of its property, which must follow due process.

De Klerk assured investors that the company had not inflated dividends in its most recent full-year results, saying most of its income came from directly owned properties.

Standard Bank’s securities arm, SBG Securities, said in a research note dated September 14 that Growthpoint generated about R145m in income from “nonrecurring sources” so as to deliver 6.5% growth in dividends. De Klerk said of the R6.1bn of total income that the group earned in the 2018 financial year, less than R100m was not rental income.