Growthpoint Properties announces that it will purchase a portfolio of 48 properties from Tresso Trading 119 for R1.08bn - on a forward yield of 11.1% - thereby increasing its total property assets to more than R8.3bn. Growthpoint chief executive Norbert Sasse

LINDSAY WILLIAMS: That’s quite a big - a 15% increase in the portfolio. I haven’t had a real chance to look at the deal. Can you explain it to us please?

NORBERT SASSE: Yes, certainly. Growthpoint was offered the opportunity to make to bid on a portfolio of properties which Tresso wished to dispose of - that’s Tresso Trading 119 - and we’ve gone through an entire process of doing the financial due diligence, and put in an offer on 28 October 2004 - to acquire the portfolio for a total purchase consideration of one billion and 80 million. It has to be settled partly in cash - about 75%, or R810m in cash - and the balance R270m through the issue of 43.5-million new Growthpoint linked units at R6.20.

LINDSAY WILLIAMS: Did you have fierce competition for this? You say you put the bid in - the offer - on 28 October 2004 - were other people interested in the portfolio?

NORBERT SASSE: To be honest, I’m not entirely sure which other parties were offered the opportunity. We were given details of the portfolio - and asked to make an offer by 28 October - which we did. We weren’t privy to any other competing offers, or to any information on who the competing bids might have been.

LINDSAY WILLIAMS: Can you tell us about the portfolio? The mix?

NORBERT SASSE: Sure. It’s a mixed portfolio - comprised of retail, commercial offices, industrial, warehousing and, in fact, there’s one hospital in there as well - which is a lease with Netcare for the next four years. It is predominantly weighted towards office space, as well as industrial - and that’s where we believe the real value lies. If you consider the three elements of the property sector being retail, offices and industrial - there’s no question that retail is relatively expensive at the moment, and a lot of listed property funds, as well as individuals, are looking for good quality retail investments. We believe the real value lies, at the moment, in office and industrial space, and if you consider the fact that we are paying in the order of just R3 200 a square metre, on average, for the entire portfolio - we believe that it does offer value. If you were to try and develop new offices and industrial space today - you’d be paying R500 to R1 000 per square metre for your land, and you certainly couldn’t build for R2 000 to R3 000 per square metre. Costs for building would be double that, so we believe that the office space at the moment is offering value, and therefore this acquisition which is, from a growth lettable area, predominantly weighted towards office and industrial. Ninety percent of the gross lettable area is comprised of industrial and office space. Office space is about to turn. We’re seeing vacancies in office space reduce, and we believe it’s only a matter of time - maybe the next 18 to 36 months - that rental levels in office space are going to firm substantially off their current levels.

LINDSAY WILLIAMS: There’s very few to let signs - compared to a year ago - around this part of the world. Are you finding the same thing in the Western Cape, because I understand the portfolio is mainly based there, isn’t it?

NORBERT SASSE: I’d say the portfolio that we acquiring will take Growthpoint’s exposure to the Western Cape up from about 8% to 14% of gross lettable area. Certainly, the Western Cape is not too dissimilar, the dynamics, to what we’re finding in the Gauteng area. Vacancies within the Growthpoint portfolio right now are in the order of about 6% to 6.5%. I think nationally you are probably talking more 8% to 12%, but vacancies are being sucked up - there are quite a few conversions, offices are being converted to residential. I think that’s a phenomenon in the Cape market, and certainly in the Claremont area - where a couple of the properties that we are buying are located. We’ve seen vacancies reduced from 25 000 square metres about six to nine months ago, to 5 000 square metres. Some of the institutional shareholders that we’ve spoken to there also confirmed that they’ve seen rent levels firm from R45 to R50 gross for good office space to R65.

LINDSAY WILLIAMS: Does this mean you’re going to try and increase the industrial and commercial percentage of your portfolio conscientiously? Are you going to be more heavily weighted towards that in the future?

NORBERT SASSE: I wouldn’t say, necessarily, in the future. I think depends on where the opportunities lie. We’re comfortable with our exposure at the moment - after this transaction about 40% of our portfolio, by lettable area, will be retail, 39% office, 14% industrial. Then we’ve got a few warehouses and one hotel, and one hospital - so it’s still predominantly retail and office, and depending where we can find value - that’s where we will invest. If the retail sector starts offering value again - and those opportunities are scarce - we would certainly look to participate in those opportunities as well. But it’s not a focused drive of ours - to increase office and industrial - it really does depend where the opportunities lie, and where we see we can buy value...