Casting the net wider

Growthpoint forced to look for new income streams to counter floundering economy and weak consumer spending

Sector heavyweight Growthpoint Properties last week declared dividend growth of a decent 6.5% for the year to June 30.

Income payouts were boosted by the company’s recent entry into Romania as well as the inclusion of profits from its new trading and development business.

However, if one looks at the underlying performance of Growthpoint’s domestic assets there is no doubt it is becoming increasingly difficult to make money on SA shopping centres, offices and industrial buildings. Growthpoint is the JSE’S largest and most diversified Sa-based property counter with total assets of R122.3bn (70% local), which makes it a reliable bellwether of the general state of the SA commercial property market.

Growthpoint CEO Norbert Sasse said at the annual results presentation that the SA business was operating in an “extremely tough market where any growth is good growth’’. He said as long as the local economy stayed in the doldrums, investors shouldn’t expect fireworks from Growthpoint’s SA portfolio.

Oddly enough, he said, overall vacancies were down over the past year, from 5.7% to 4.4%. But retaining tenants has come at a cost, in the form of rising pressure on rental growth.

“Tenants can now literally dictate how much rental they want to pay,” said Sasse.

The impact of a weak economy is particularly evident in Growthpoint’s retail portfolio, made up of 58 shopping centres across SA including stakes in Brooklyn Mall in Pretoria, La Lucia Mall in Umhlanga and Festival Mall in Vanderbijlpark.

Growthpoint’s flagship asset is the V&A Waterfront precinct in Cape Town, which it coowns with the Public Investment Corp. ➦

Growthpoint