No grow­ing pains for Growth­point

Finweek English Edition - - INSIDE - BY GLENDA WIL­LIAMS

It’s a chal­leng­ing trad­ing en­vi­ron­ment, yet Growth­point Prop­er­ties Limited, the largest listed prop­erty com­pany on the JSE, still man­aged to de­liver dis­tri­bu­tion growth of 7.5% for the six-month in­terim pe­riod to end De­cem­ber 2014.

“We’ve achieved sig­nif­i­cant growth, mak­ing Growth­point a larger, more di­verse and more de­fen­sive in­vest­ment for our share­hold­ers,” says Growth­point CEO Nor­bert Sasse.

Sasse at­tributes the com­pany’s pos­i­tive re­sults to its South African prop­erty port­fo­lio, which con­trib­uted 65.6% to its dis­tributable in­come, but says that grow­ing dis­tri­bu­tions from Growth­point Prop­er­ties Australia (GOZ) and favourable ex­change rates also en­hanced dis­tri­bu­tions. The ac­qui­si­tions of Ab­seq and Tiber, as well as its listed in­vest­ments in Acu­cap and Sy­com val­ued at R5.3bn, also helped boost pos­i­tive re­sults.

The com­pany owns and man­ages a di­ver­si­fied port­fo­lio of 431 prop­er­ties lo­cally, 51 prop­er­ties in Australia through its in­vest­ment in GOZ and 50% of the V& A Wa­ter­front in Cape Town.

The SA re­tail port­fo­lio is val­ued at R16.3bn, off ice at R25.4bn and industrial R9.7bn. Over and above that is the V& A, worth about R6bn. “And we will be in­te­grat­ing Acu­cap and Sy­com that will add an ad­di­tional R11bn to re­tail and around R7bn to the of­fice port­fo­lio,” ex­plains newly-ap­pointed man­ag­ing direc­tor Esti­enne de Klerk.

Sub­ject to ap­prova l by the Com­pe­ti­tion Tri­bunal, im­ple­ment­ing the Acu­cap scheme on 1 May, will in­crease Growth­point’s prop­erty as­sets to nearly R100bn and its SA prop­erty port­fo­lio would grow to over R75bn. “The trans­ac­tion will also add 5% to Growth­point’s re­tail weight­ing bring­ing it to 39%, with off ices at 46% and industrial as­sets at 15%,” says Sasse.

As re­tail is less volatile than of­fice and industrial, Growth­point is keen to grow its ex­po­sure to this space. But find­ing de­cent re­tail as­sets − part of the mo­ti­va­tion for the Acu­cap deal − is a chal­lenge, says Stephan le Roux, di­vi­sional direc­tor of Growth­point’s Re­tail Port­fo­lio.

“The big­gest re­tail spa­ces are all per­form­ing very marginally,” says Le Roux. “Given the cur­rent eco­nomic sit­u­a­tion there is lit­tle scope to de­velop new re­tail space ex­cept in a few cases like town­ship re­tail, so I think we will see a three- to five-year con­sol­i­da­tion phase.”

Weaker prop­erty fun­da­men­tals and the El­ler­ines bank­ruptcy saw va­cancy rates in­crease slightly. But Growth­point still man­aged a lease re­newal suc­cess rate of 65.2%.

Be­sides ac­quir­ing of­fice and industrial de­vel­op­ments in Park­town ( Jo­han­nes­burg), Pine­town (Dur­ban) and Samrand (Midrand), the com­pany also se­cured a R3.2bn devel­op­ment and ac­qui­si­tion pipe­line in SA, the largest be­ing Growth­point’s 55% share in the new R3bn Dis­cov­ery head off ice in Sand­ton.

The V& A con­trib­uted 8.8% to Growth­point’s dis­tributable in­come with re­tail, of­fice and industrial all record­ing pos­i­tive ac­tiv­ity. The com­pany in­vested R173m in devel­op­ment and cap­i­tal projects at the V& A Wa­ter­front dur­ing the pe­riod and com­mit­ted R459.2m to new de­vel­op­ments, in­clud­ing the Grain Silo precinct. Growth­point also con­tin­ues to in­tro­duce more res­i­den­tial op­por­tu­ni­ties.

It also has a large stake in GOZ with as­sets worth R20.7bn. “Over the past five years we have taken it from a com­pany that had AUS$650m in as­sets to AUS$2.2bn. The mar­ket cap has gone from AUS$40m to AUS$1.7bn. It has been a real suc­cess story,” says De Klerk. GOZ con­trib­uted 17% to Growth­point’s to­tal dis­tributable in­come and the com­pany con­tin­ues to grow its port­fo­lio here, com­mit­ting R790.2m for fur­ther devel­op­ment.

V&A Wa­ter­front, Cape Town

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