Norbert Sasse, chief executive officer of JSE listed property company, Growthpoint Properties Ltd told a an Alliance Investor Breakfast Club at Crystal Towers Hotel & Spa, Century City how South African listed property breezed through the storm of the global financial crisis emerging unscathed on the other side.

Talking to a room full of high profile property players and investors, Sasse explained, how by sticking to the fundamentals, South African listed property companies managed to weather the storm and not only survive the crash but in some cases thrive. Said Sasse, “The companies that strayed furthest from their model suffered the most.”  SA listed companies tended to stick to their more conservative model but the main reason for the economic meltdown was refinancing risks and a deterioration of property fundamentals.

While “it was a pretty sad story globally” in terms of listed investments, South Africa seemed to be cruising, in particular Growthpoint who, when the markets crashed, spent time analysing the markets and looking for opportunities. The drop in property values and stock markets in the UK, US and Australia provided them with an opportunity to acquire property at attractive yields. Their fund grew during the crisis period and they acquired Australia's Orchard Industrial Property Fund (OIF). Sasse said that Australia actually emerged from the recession without ever going into one and being a familiar market to South Africans was an attractive place to diversify.

Explaining why South African listed property fared so well, Sasse listed a number of reasons. One crucial one was that our big banks remained solid throughout the recession, with the result that there was no risk of South African property companies not been able to refinance if required. This was the single biggest factor in the rest of world where companies in trouble could not refinance their debt. The story was true with their Australian purchase whereby the company had good properties but needed to recapitalise. That’s when Growthpoint stepped in, invested close to R1.3 billion, recapitalised OIF and are receiving excellent returns on their investment down under. The OIF deal allows shareholders the opportunity of geographically diversifying their investment in Growthpoint into Australia through the acquisition. Growthpoint Australia focuses on logistics and industrial space primarily for large retailers in the State of Victoria. Said Sasse, “The investment was made when the Australian market was at its lowest point, providing an extraordinary prospect during a small window of opportunity,”

Speaking about South Africa Sasse said we were hit hard by the recession, “We are now technically out of the recession but we have seen the impact, particularly in the commercial sector which tends to lag the economy by 9 -12 months. It will take some time to recover, the vacancy rate in the office sector is the highest it has been for five years but does remain low overall.” 

With regards to the economic recovery in SA, Sasse said the recovery would be gradual and that while we have been spared blackouts for the last year or two, that was due partially to the slowdown in the economy and the cost and supply of electricity are two crucial factors which could hamper real growth and development. The large increases in administrative costs has driven up costs of occupation and is putting pressure on rentals and rent payers. He made the point that many large landlords are doing soft deals with tenants, particularly in the shopping centers to maintain an acceptable occupancy rate.