No growing pains for Growthpoint
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