THE property portfolio of Growthpoint now sits at 440 properties diversified across retail, office and industrial classes. Last year was not a highly acquisitive year for the group, with the focus mainly on completing the tail end of some notable developments, including the R500m The Place on Sandton Drive, where Growthpoint head office is now located.

The Investec-Sandton extension was finished, as was Woodmead Retail Park, and Montclare Place in Claremont, Cape Town.

The refurbishment of Grand Parade Centre in the Cape Town CBD should be completed within the next few months.

Growthpoint CEO Norbert Sasse says the group is always on the lookout for new opportunities, whether the direct acquisition of physical property assets or other property-owning companies, listed or unlisted, both on or offshore.

“In some cases it may be preferable to go straight to the underlying asset. In other instances it may be more opportune to acquire the holding entity, particularly if listed, as this vehicle responds more quickly, through its share price movements, to changes in the sector fundamentals. The movements in the physical asset price do tend to lag behind changes in market conditions. Physical asset prices will inevitably come down in these severe global economic conditions and distressed sales will present buyers with opportune bargains.”

Sasse says the group is always open to demand-driven development if clients request this.

“As the industry consolidates, we could consider transactions involving other loan-stock companies. There is significant corporate activity in the local industry, evidenced by declining membership of the Property Loan Stock Association of SA, with the trend set to continue.”

Sasse says that although SA is still somewhat protected from global events, it cannot remain so for much longer.

“The property sector is now starting to see increased vacancies. In the main, this negative trend is restricted to new developments coming on to the rental market in these difficult times. Owners who hoped these properties would be fully let when complete are being disappointed. In quarter four last year there was a marked slowdown in the take-up of new space and a fall-off in potential tenant inquiries. A positive is that occupancy levels for existing assets are holding up quite well, although tenants are consolidating and in some cases reducing the rental area they require.

“Rental escalations for leases that are renewing in this tight time will not be as high as in the past few years. The rental debtors’ book is lengthening, but this does not translate into massive bad debt write-offs. Again, quarter four saw a noticeable slowdown in rental collections, but this was by no means a disaster.”

Sasse says there are several support factors for the property loan-stock sector.

“We are commencing an interest-rate-cutting cycle, building costs are starting to decline and construction margins under pressure free up capacity for the builders, and after a period of consistent price hikes steel is falling sharply. New builds are starting to look more feasible, as input costs come down, but costs of financing and building would never decline to such low levels that we would face an oversupply of property.”

Source: Business Day