Growthpoint raises R977m

LISTED property giant Growthpoint Properties has added to its hefty capital raise in May by raising a further R977m in new equity through its distribution reinvestment scheme.

LISTED property giant Growthpoint Properties has added to its hefty capital raise in May by raising a further R977m in new equity through its distribution reinvestment scheme.

Including Growthpoint’s R2.5bn equity raise in May, the company has raised almost R3.5bn in new equity over the past four months.

Following the company’s declaration of a final cash distribution of 76.3c per share for the period ended June, the company said on Monday that shareholders holding 67.7% of qualifying shares had elected to reinvest their distributions.

This resulted in the issue of 44.4million new shares and the company retaining R977m, based on the dis- counted issue price of R22 for the new shares.

Although this capital raise is dwarfed by Growthpoint’s equity raise in May, it is one of the largest equity raises in the sector in the year to date.

In May, Growthpoint undertook the listed property sector’s largest accelerated book-build to date, according to analysts, when it raised R2.5bn by issuing 90-million new linked units at R28 each.

Analysts have said the timing of the R2.5bn equity raise was fortunate, given the significant price declines that Growthpoint and the rest of the sector have been subject to immediately after the capital raise was completed. The price weakness is a function of weakening bond yields, given the close relationship between listed property and bonds.

Sesfikile Capital director Mohamed Kalla said Growthpoint’s “substantial” capital raisings suggest the company could be eyeing a large acquisition opportunity.

Mr Kalla said as Growthpoint’s share price had strengthened over the past few weeks, the discount of the new shares, priced at R22 each, had grown since the scheme was announced.

The new shares were issued at a significant discount compared to the company’s R2.5bn equity raise, although “it’s now a very different market”.

Mr Kalla said Growthpoint was likely to use the proceeds of the capital raise for its repurchase of black economic empowerment (BEE) shares, wherein the company is buy- ing out some of its BEE partners and allocating the shares to a staff share incentive scheme.

The proceeds were also likely to be used towards various development projects totalling about R1bn.

“But I think the market is waiting for news on a potentially large acquisition, which management has been quiet on, although not too unexpected given current market volatility.”

Growthpoint executive director Estienne de Klerk said the distribution reinvestment scheme had resulted in “a nice equity raise in the market that we’re in”.

“The best part about it is that it’s with our existing unitholders and there are no material costs to raising this kind of capital,” Mr de Klerk said. In addition, “this has certainly been one of the better supported” dividend reinvestments plans Growthpoint’s history.

For shareholders not choosing the reinvestment plan, a cash distribution of R466.3m was payable.

Mr de Klerk said although the latest equity raise was at a large discount to the prior one, “the interest rate environment is materially different to what it was — you have got to operate within the market that you’re playing in”.

He said Growthpoint had a “plethora” of uses for the capital, including funding a number of projects and continuing capital expenditures.

While the past two equity raises had reduced Growthpoint’s gearing, the conclusion of potential deals over coming months would see gearing rise again.

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Mr de Klerk said the possibility of an interest rate increase meant “we have taken a prudent view to raise the capital while the going’s good”.

Although Growthpoint is punted to announce a deal in coming months, it said recently that its fight to acquire Fountainhead Property Trust’s portfolio had finally been abandoned.

Fountainhead’s portfolio, which is valued at more than R10bn, was the centre of a heated battle with rival Redefine Properties.

Acquisition opportunities in the sector have been few, although some CEOs have said they expected opportunities to return to the market as physical property prices were gradually revised downward following price weakness in the listed sector.