Growthpoint Properties looks to Australia for growth

Posted On Thursday, 02 June 2016 15:08 Published by
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Growthpoint will not rush into other emerging markets, but instead bide its time and continue to grow its existing investments in Australia.


Growthpoint Properties, the largest South African-based property fund, will not rush into other emerging markets, but instead bide its time and continue to grow its existing investments in Australia.

CEO Norbert Sasse said on Tuesday in an update to investors in respect of the company’s June 2016 financial year that his team had scoured Europe and Australia recently.

“We have looked throughout Europe including countries such as Romania, Poland and the UK and we continue to do so.

“We have not found anything suitable yet. I find Australia is currently very attractive, and there may be more opportunities there,” he said.

Growthpoint already has significant exposure to Australia through its subsidiary, Growthpoint Australia.

Sasse said Growthpoint Australia was on track to achieve strong earnings and distribution growth. In contrast, the South African market remained difficult, according to Sasse.

“There are many headwinds in the domestic market. I believe that we are managing them well, however, I admit it is tough here,” he said.

“Business confidence is low and, most notably, the retail market has come under new pressure. Consumers have become weaker, and there is too much new stock coming on to the market. SA is currently overshopped,” he said.

Growthpoint’s existing shopping centres were facing competition from new malls, he said.

Often customers would leave existing malls to experience the new ones as soon they opened, as they were attracted by hype and opening specials, which immediately reduced turnover. These customers could then return to their regular centres later on.

Sasse said that, nevertheless, middle-income and upper- income shoppers at its centres were resilient. Cape Town retail was also performing well, especially at the Victoria & Alfred Waterfront, of which Growthpoint owns 50%.

Asked if Growthpoint would rather take over a South African fund that already had offshore exposure, instead of buying assets abroad directly, Sasse said this was not one of the fund’s current main strategies.

“We will look at all opportunities that come our way, but we aren’t setting out to take over funds that own assets overseas and may be inwardly listed in SA,” he said.

Many South African funds have bought properties or created joint ventures with property companies in eastern and central Europe in the past couple of years.

The cost of funding has been lower there than in SA, and yields have been more attractive, with deals being earnings-accretive immediately. This has boosted distribution payouts.

Source: Business Day

Last modified on Friday, 24 June 2016 01:19

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