Growthpoint scores in Europe

• Local property investment company’s portfolio in central and eastern Europe rises to R8bn in just two years

Growthpoint Properties may have been a slow starter in eastern Europe but its conservative approach had paid off, with the group having built up a sizeable portfolio worth R7.7bn in the region. CEO Norbert Sasse said the cautious approach Growthpoint took as it built a presence in central and eastern Europe had been vindicated.

Growthpoint Properties may have been a slow starter in eastern Europe but its conservative approach has paid off, with the group having built up a sizeable portfolio worth R7.7bn in the region.

In an interview with Business Day, CEO Norbert Sasse said he felt Growthpoint, which is the largest property company in the country, had been vindicated with respect to the cautious approach it took as it built a presence in central and eastern Europe. This was while its rivals rushed into the region and made large investments over the past three years.

Growthpoint, which has investments worth close to R120bn, has built up exposure to central and eastern Europe worth about R7.7bn in just short of 18 months.

Its initial investment in Romania at the end of 2016 was criticised for being “too small”. The company spent R2.7bn on 26.9% of Globalworth Real Estate Investment, which was focusing on Romanian offices at the time.

“Our strategy has always been to invest with a measured approach. We went into Australia carefully and we are doing the same with [central and eastern Europe]. We believe in consistent, long-term value creation based on property fundamentals. Some other funds have used financial engineering techniques to boost their returns but this has not been sustainable,” said Sasse.

Globalworth has since acquired 70% of Griffin Re (GPRE), which enabled it to establish a presence in Poland, which is the largest economy in the region. GPRE is being rebranded as Globalworth Poland and will be renamed Globalworth Poland Real Estate.

GPRE announced in February it wanted to raise €400m of capital through the listing of ordinary shares. Growthpoint would invest between €120m and €150m via its subsidiary, Growthpoint Properties International, into GPRE.

Growthpoint also announced last week that it had successfully priced its inaugural $425m eurobond, which has a five-year maturity. The fund will swap the net proceeds into euros to fund its expansion in central and eastern Europe in line with its internationalisation strategy.

“We are pleased with the support for our eurobond debut.

“It is a reflection of our prudent approach to investment, balance sheet management and governance, and an endorsement of our internationalisation strategy. The success of this transaction further strengthens Growthpoint,” Sasse said.

“We have expanded our funding sources, having tapped local debt markets recently.

“We found it was easier to get dollar funding abroad. Now we can convert those dollars to euro and then do more business in Europe,” Sasse said.

According to Stanlib analyst Ahmed Motara, Growthpoint is now delivering “strong returns to shareholders without negative surprises”.