International company Rectron, the leading computer components distributor in Southern Africa, recently sold its Jo’burg head office and Durban office buildings to Growthpoint Properties Limited, the largest JSE-listed South African property company, for R95 million.

This follows the trend of large companies addressing the issue of property ownership versus leasing and increasingly selecting to sell their properties to listed property funds and reinvesting the proceeds to achieve a higher return on capital, while disposing of property risk.

The properties comprise Rectron Office Park in Midrand, a prime position 19,152m2 office and distribution warehouse and the superbly located 2,295m2 offices and distribution warehouse in Umhlanga Ridge Town Centre.

Financial Director Jaco Jonker explains that this decision was taken to fund the significant growth that Rectron is currently experiencing.

“Owning a building takes millions out of cashflow and this deal has allowed us to release these funds into working capital and effectively finance the expansion of the company,” notes Jonker.

He includes increased budgeting accuracy as a result of fixed property expenses as one of the many other benefits for this company which, as a result of growth, has experienced the need for expanded premises on a number of occasions.

Jonker believes that, with this growth set to continue, another benefit of its lease with Growthpoint is that Rectron will be able to call on Growthpoint for larger premises without having to sell and buy new buildings, as they have in the past.

“Our business is technology distribution, property is not our game. Now we can focus on our business and leave the property to the property professionals,” says Jonker.

Growthpoint Properties Limited Commercial Fund Manager Rudolf Pienaar emphasises that the acquisition of the Rectron properties reaffirms Growthpoint’s objective of investing in quality, diversified physical property assets that are underpinned by long term, sustainable, escalating income streams. 

“Through this transaction Growthpoint has acquired a prime property investment, a blue chip tenant and a valuable business partner,” notes Rudolf Pienaar, Growthpoint Properties Limited Commercial Fund Manager.

The transaction has affirmed Growthpoint’s position as the preferred property owner of some of South Africa’s leading businesses. Business Connexion (Proprietary) Limited, a subsidiary of Business Connexion Group Limited, also recently sold a portfolio of eight prime properties to Growthpoint, for an aggregate purchase consideration of R380 million. Growthpoint also owns Investec’s Sandton head office at 100 Grayston Drive and the Investec Cape Town foreshore building, which it purchased in 2003.

Growthpoint CFO Stuart Snowball explains that now is the ideal time for companies that have been considering unlocking capital to sell their properties into a listed fund.

“Listed property funds are at present eager to increase assets and are able to purchase properties at attractive yields to sellers,” notes Snowball.

He elaborates that the strong performance of the listed property sector over the last few years, resulting from a lower interest rate environment, stable economy and consumer confidence, has resulted in the substantial re-rating of these stocks and most listed property stocks are trading at substantial premiums to historical net asset values.

“Large listed property funds such as Growthpoint are able to access the debt capital market at low rates through securitisation. In addition Growthpoint’s linked units are highly liquid and are trading at yields below those of long bonds. Thus the company is able to obtain capital at a relatively low cost and purchase properties at yields that are advantageous for sellers,” says Snowball.

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Issued on behalf of:                              
Growthpoint Properties Limited
Norbert Sasse: CEO
Tel. 011 286 7306
Cell.083 632 1599

By:                                                      
Marketing Concepts
Sandy Davey/Bronwen Noble
Tel  011 880 2213
Cell 083 453 6668  (Sandy)
Cell 082 855 4349 (Bronwen)