Rental income boosts property fund

27 Aug 2011

JSE listed Property company Growthpoint Properties reported a distribution growth of 8.1 percent to 131.0 cents for the financial year ended 30 June.

Adderley Offices in Cape Town

Growthpoint, the largest listed property company with a market capitalisation of R29.1billion says distributions are based on rental income and exclude trading or capital costs.

Chief executive officer Norbert Sasse says Growthpoint distributions grew from 5.8 percent in the same period in 2010 to 8.1 percent in 2011.

“Notwithstanding the difficult local and economic and financial conditions as well as an uncertain outlook for global economic growth, we are pleased to report positive performance,” says Sasse.

He explains that they attribute this positive performance to aggressive property cost management, vigilant control of arrears, fortified portfolio occupancy levels and the distribution enhancing performance of Growthpoint Properties Australia (GOZ) in which Growthpoint has a 61 percent holding.

Growthpoint has a diversified property portfolio comprising 424 properties in South Africa, 37 properties in Australia and a 50 percent stake in the properties of the V & A Waterfront in Cape Town.

Its total property value including Australia is R45.7billion rand, with retail valued at R12.0billion, office portfolio R13.7billion, industrial portfolio R6.8billion, the V&A Waterfront R4.8billion and Australia R8.4billion (AUD1.16billion).

Its top retail portfolio by value includes among others, Brooklyn Mall in Pretoria, La Lucia Mall in La Lucia, Northgate in Johannesburg, Walmer Park Shopping centre in Port Elizabeth, Woodmead in Sandton, Golden Acre in Cape Town and River Square Shopping Centre in Vereeniging.

Sasse says turnover growth at Growthpoint’s top shopping centres outperformed national retail sales growth.

The office portfolio includes Investec and The Place in Sandton, Hatfield Gardens in Pretoria, Constantia Office Park in Roodeport and The District in Cape Town.

Industrial properties include Hilltop Industrial Estate in Germiston, Pine Industrial Park in Durban, Rushair in Johannesburg South and 226 Brakpan Road in Boksburg.

Sasse says the overall vacancy level on all three portfolios came down from 6.4 percent to 5 percent, adding that the retail and industry property sectors were holding steady and showing some resiliency.

A major highlight for Growthpoint is the 50 percent acquisition of the iconic V& A Waterfront property for R4.9billion. Growthpoint and the Government Employees Pension Fund (GEPF) represented by the Public Investment Corporation Ltd bought the property in equal proportions and took transfer in June 2011.

V&A Waterfront is considered the premier property asset on the African continent and country’s top tourist destination.

Top retail property, La Lucia Mall in Durban is valued at R1 412million.

“The V&A Waterfront transaction has given Growthpoint development exposure to what is arguably the most valuable development bulk and rights in SA,” says Sasse.

He says the property’s location, mix of uses and future development opportunities all support rental growth and prospects which are better than those embedded in the current Growthpoint portfolio making it a performance enhancing acquisition.

Development rights have been approved for 603 868 square metres of which 220 035 square metres of bulk remains available for development.

Growthpoint has set aside R685million to spend on the development of the property. The Clock Tower /Silo development will cost R640million, Clock Tower refurbishment, R31million and the Food Court refurbishment, R14million.

The new development with Allan Gray as an anchor tenant is schedule to commence in September/October 2011 within the Clock Tower/Silo precinct with occupation date anticipated to be 1 April 2013.

This development will include 18 000 square metres of office space, 436 square metres of retail (on spec and to cater for the convenience of Allan Gray staff) and 740 parking bays.

Top industrial property, Growthpoint Industrial Estate in Germiston Gauteng is valued at R314million.

Sasse says the focus in the short term will be on letting vacant space, renewing leases that are expiring and retaining tenants (especially in the industrial sector.

“We have noted that clients are generally seeking shorter leases reflecting uncertainty on the outlook of the SA and global economies.”

He adds that distribution growth for next year is expected to be between 3 percent and 7 percent for the full year. – Denise Mhlanga

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