Growthpoint seeks fresh opportunities

Johannesburg – Listed Growthpoint Properties has its eye on the UK and western European property market for acquisition opportunities rather than in eastern Europe.

It is also making progress with its strategy to enter real estate investment in several African markets outside of South Africa.

Read: Growthpoint eyeing alternative markets

Norbert Sasse, the chief executive of Growthpoint, said yesterday that if the right opportunity presented itself in the UK and Europe they would certainly explore it.

But Sasse said the challenge for South African companies at the moment were numerous and included the cost of debt if any transaction was to be funded in rand and the exchange rate with the rand at record lows to the euro.

Joint venture

In Africa, Growthpoint has embarked on an equal joint venture with global investment management firm Investec Asset Management to form a new management company, which will establish and grow a third-party institutional pan-African real estate business.

The aim is to grow the business to an optimal size for a possible major stock exchange listing in the next eight years, with Growthpoint investing an initial $50 million (R787.46m) into the business.

The joint venture is partnered by the International Finance Corporation, which has approved an investment of $40m as a cornerstone investor.

Sasse said they were going in small with a third-party model that they believed would grow to create a meaningful new revenue stream for Growthpoint.

“We see the current market dynamics on the African continent as an opportunity. Many local currencies have devalued against the US dollar, which has established more realism about the African real estate investment story.

“Prices and yields are starting to reflect this. This makes it a good time to buy into countries with devalued local currencies,” he said.

Growthpoint yesterday reported 6 percent growth in distributions a share to 89.5c for the six months to December from 84.4c in the previous corresponding period.

Sasse said this was in line with its guidance of between 5 percent and 6 percent distribution growth for the period.

Similar distribution growth was anticipated for the full year as what had been achieved for the half year, he said.

Stable fundamentals

Growthpoint’s South African property portfolio contributed 76.7 percent to its distributable income.

Sasse attributed the positive distribution growth to stable fundamentals in Growthpoint’s South African property portfolio, a strong performance by its V&A Waterfront investment and growing distributions from its 65 percent interest in Growthpoint Properties Australia, together with favourable exchange rates.

He said the South Africa market dynamics were negative, with anaemic economic growth, rising interest rates and operating costs, slowing credit and rental growth, weak demand and increasing supply and competition, constrained consumer demand, lack of business confidence and negative gearing.

Sasse said vacancies were lower at 4.9 percent compared with 6.4 percent a year earlier, arrears were holding up and the cost-to-income ratio was on a downward trajectory and had improved to 26.5 percent from 27.8 percent.

But Sasse said rental growth rates and vacancies were under pressure.

He said like-for-like rental growth at 6.5 percent was still fairly robust, but was being affected by competition from newly opened centres.

 

Shares in Growthpoint dropped 0.16 percent lower to close at R24.32 on the JSE yesterday.

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