GROWTHPOINT Properties has grown its asset base from R1.5bn to about R100bn in 14 years, but the next chapter is set to be more challenging.

With few acquisitions opportunities locally and an increasingly competitive market, here and abroad, SA’s largest listed property fund has to find new ways to enhance returns to shareholders.

Some analysts believe Growthpoint may need to dispose of weaker or noncore properties in order to increase its distribution payouts.

The property fund has amassed a portfolio valued at nearly R80bn in SA and owns properties valued at about R20bn in Australia. The biggest asset is its 50% stake in the Victoria & Alfred Waterfront, valued at R6.7bn. The firm paid R4.9bn for it in early 2011, which means its value has risen by about 37% in four years.

Growthpoint CEO Norbert Sasse said last month the fund needed to focus on new developments and also upgrade its existing portfolio.

Old Mutual Investment Group portfolio manager Evan Robins believes distribution growth should in fact not be the main target.

“I think Growthpoint should act to maximise long-term value, not boost next year’s distribution growth. There are many once-off things they can do to boost their performance next year, some of which would lower shortterm growth or change the risk profile. For example they could do a currency swap on their Growthpoint Australia holdings, do an accretive offshore acquisition, not hedge their debt further,” he said.

Coronation Fund Managers portfolio manager Anton de Goede said: “Growthpoint can boost prospective dividend growth by further focusing on active management within its current portfolio. “This can be done by further disposals and enhancing existing assets where land and bulk right costs are already in the cost base.”

Stanlib’s head of listed property funds, Keillen Ndlovu, believed Growthpoint was an attractive investment proposition but a number of forces were acting against it. “Given Growthpoint’s enormous size, it needs sizeable transactions or acquisitions in order to make a meaningful difference in their distributions.”

Growthpoint’s portfolio was also largely exposed to the underperforming office market, with offices making up 46% of the total portfolio, Mr Ndlovu said. “The office market is the least exciting of the three sectors. It may take some time to recover. Management has not been very active in disposing of lower quality and smaller buildings.”

Source: Business Day