JOHANNESBURG – The acquisition appetite of Growthpoint Properties over the last year is paying off; it declared an 8.3% distribution growth to 161.3 cents per share.
The largest JSE property company by market capitalisation (R59 billion) says the growth in distributions was boosted by the number of acquisitions during the financial year.
“The last 12 months was the busiest year since we started Growthpoint back in 2001. If you add all the investment activity and capital spend, you get to a number of R15 billion in investments,” explains Growthpoint CEO Norbert Sasse.
Some of the acquisitions during the financial period includes a R1.3 billion deal of 17 high office properties from Abseq Properties and the entire portfolio of Tiber for R5.7 billion.
In what is described as Growthpoint’s “ biggest investment”, it announced a stake bid in Acucap and Sycom of 34.9% and 23.2% respectively – a share swap deal worth R4.5 billion.
“We refer to it as a strategic stake in that we felt we were a little bit short in our portfolio on the retail side and the Acucap and Sycom deal has quality retail properties,” he says.
After concluding the deal, Growthpoint might look to up its stake in the respective companies to 100%.
“Growthpoint has never been a passive investor in any entity. The opportunity with Acucap was to initially take a stake of 34.9%, which is a threshold for making a mandatory takeover. We are in discussions to take stake above that,” he says.
Growthpoint also acquired eight portions of land, one industrial property and one office property amounting to R490 million during the year.
Development and capital expenditure for its South African operations amounted to R1 billion, including its development of the Discovery head office in Sandton together with Zenprop.
The property company’s offshore investment, Growthpoint Australia (GOZ), is also on an acquisition drive; it owns 51 properties valued at R20.9 billion.
The investment involved the purchase of assets in the office and industrial sector to the tune of R1.9 billion.
“GOZ remains the single best performing investment we made. The idea is to continue to see it as a market that offers value. We will continue to look for growth opportunities in Aussie,” says Sasse.
Old Mutual Investment senior portfolio manager Evan Robins says Growthpoint’s performance won’t evolve around domestic acquisitions, but on how the company manages its assets.
“They always have had an appetite to grow by acquisition, demonstrated most recently in the acquisition of Acucap, Sycom and Tiber. They want to increase their exposure to the retail sector, but there is a limited stock of large shopping centres to buy,” Robins told Moneyweb.
“They are not the type of fund that will buy standard grade assets – they will want to buy prime quality assets,” he says.
On the vacancies front, Growthpoint saw a moderate rise in overall vacancies in the financial year to 4.9% from 4.4%. “It’s not as bad as it looks. In our acquisitions during the year, we acquired property which have over 55 000 square metres of vacancies in them. We went on and bought a lot of vacancies,” Sasse explains.
Office vacancies increased to 8% from 7.8%. The retail sector recorded vacancies of 4.5% from 3.7% and the industrial sector vacancies remained flat at 3%.
Growthpoint has exposure to African Bank (Abil) which has been placed under curatorship, through its retail sector investments. The exposure is through Abil’s subsidiary Ellerines, through tenants at shopping centres and warehouses. Sasse says its exposure to the troubled group is 0.7% of the total gross rental income of about R50 million to its overall portfolio.
“We are not going to lose the full R50 million, we might lose half of that or even less…. The numbers of Ellerines are not reflected yet. We have a big diversified portfolio across the sector and this might be a small impact”
The company is seeing pressure in its renewal success rate in the office and industrial sector. Commenting on this, Sasse describes the property market as a “dog eat dog world”. The overall renewal success rate dropped from 70.4% to 65.7% which is indicative of a “tough South African market” with slow growth and consumers who are under pressure.