Property giant in new strategy

LISTED property company Growthpoint is forging ahead with its strategy to develop a R15 billion fund-management business over the next five years.

Norbert Sasse, the chief executive of Growthpoint, said a capital raising for the Africa Fund was in progress – $90 million (R1.17bn) of the planned $200m to $250m had been raised – and a Healthcare Fund was being launched that would own properties worth in excess of R2bn.

Growthpoint has acquired five properties collectively worth R2.4bn for the Healthcare Fund.

They include the Busamed Gateway Private Hospital in Umhlanga, which was acquired for R559.2m; the Busamed Hillcrest Private Hospital, which was acquired for R550.4m; and the Mediclinic Louis Leipoldt Private Hospital in Bellville in Cape Town, which was being acquired for R382.8m.

Sasse said the three major private hospital groups did not want to sell their properties and enter into leaseback arrangements, but were unable to obtain new hospital licences because of competition issues and a drive by the medical council to stimulate market competition by offering licences to previously disadvantaged groups.

He said a second tier of hospital groups was emerging, which included Busamed, Lenmed and Mellowmed. These groups did not have R500m to build a new hospital and the Healthcare Fund could provide the capital for the hospital, which would be operated by one of these groups.

Sell down Sasse said Growthpoint was looking to sell down its position in the Healthcare Fund by getting third-party investors to invest in it. “We are targeting closing the fund at the end of our financial year in June and to grow that fund to R5bn over the next two years, with an eventual target of maybe R7.5bn to R10bn. This will be part of the overall funds management strategy to get to R15bn in assets across a range of funds,” he said.

Sasse said the capital-raising initiative for the Africa Fund, the first fund it launched, was continuing, but admitted selling investment into Africa now was difficult. He said Growthpoint had committed $50m and the International Finance Corporation $40m to this fund and they were targeting to get to $250m as an initial close in the third quarter of this year.

“We have pushed it out, and if we end up with $200m, we will close and start investing and look to have a second close down the line,” he said.

Sasse said the funds raised would be from a combination of South African investors, largely pension funds and institutional investors, and offshore investors. He said the mandate for the Africa Fund was broad and the focus would be on acquiring property assets largely in East Africa and West Africa.

Sasse said the key difference with the funds-management model was that it would allow Growthpoint to own about 20 percent of an asset in a fund, but still obtain a return on the equity it put into the fund, and leverage its expertise and knowledge by charging an asset management and property management fee to increase its return on equity. Growthpoint owns 100 percent of all but three of the assets in its portfolio.

Shares in Growthpoint rose 0.44 percent on the JSE yesterday to close at R27.12.