MANAGEMENT ????? OF LISTED PROPERTY heavyweight Growthpoint has clearly made hay while the sun shines. The company’s phenomenal expansion drive has seen the value of its real estate assets balloon from R100m seven years ago to a current staggering R27bn. Its 2008 annual report shows in the financial year to end-June 2008 alone its portfolio was bulked up by property acquisitions and expansions worth R3,4bn. That makes Growthpoint’s portfolio almost three times the size of SA’s next biggest listed real estate fund (Pangbourne), with physical properties worth R11,5bn.
But it’s unlikely it will be able to maintain the same level of growth into the future. It’s becoming increasingly difficult and expensive to duplicate large, quality assets such as those already owned by Growthpoint, particularly its regional shopping centres, which include Brooklyn Mall (Pretoria), La Lucia Mall (Durban), Northgate (Johannesburg) and Waterfall Mall (Rustenburg).
Management will no doubt also be more cautious of bringing new office developments to the market. The report reads: “There are a number of new office developments that will be brought on to the market in the next year. It is expected that will create a short-term increase in office vacancies and limit the ability to increase office rentals substantially in certain nodes in the short term.”
Other factors that will make it more difficult to add new stock to its portfolio include delays in zoning processes, unavailability of electricity for large new users, high and rapidly increasing building costs and the high cost of debt funding.
“At the current cost of bringing new developments on to the market, developers will have to achieve rentals of roughly double the current in-force rentals in Growthpoint’s portfolio.”
Nevertheless, it’s expected to continue to grow income streams at double-digit rates over the near term. Management declared better-than-expected growth in distributions of 14,4% for the year to end-June.
…FROM THE ANNUAL REPORT