Growthpoint Properties Limited, South Africa’s largest JSE-listed property holding and investment company with property assets exceeding R15,0 billion, today announced its results for its milestone year ended 30 June 2006 with growth in annual distributions per linked unit of 11,1 %.

The year was marked by Growthpoint’s high liquidity, the conclusion of several major transactions, substantially increased property assets and rental streams, the introduction of a BEE partner in a R1 billion deal and the reduction in the cost of debt through the successful launch of the company’s R5 billion commercial mortgage backed securitisation programme (CMBS).

Distributions to linked unitholders increased from 73,20 cents per linked units (2005) to 81,3 cents per linked unit (2006) and, in addition, the market value of Growthpoint linked units increased by 18,1%, from R9,06 to R10,70 per linked unit at 30 June 2006. Based on the linked unit price of R9,06 as at 30 June 2005, the total income return plus capital appreciation for the year was 27,1%. Growthpoint closed on Tuesday at R11.30 per linked unit.

Growthpoint’s robust performance is set to continue in the coming year. “Similar growth in distributions can be expected for Growthpoint’s for the year ending 30 June 2007, subject to market conditions remaining stable,” says Norbert Sasse, CEO of Growthpoint Properties Limited.

In addition to normal rental escalations, the significant 28% increase in Growthpoint’s revenue was mainly due the acquisition of the R1,1 billion portfolio from Tresso in June 2005, with income from the new properties contributing to the full 12 month period to June 2006 for the first time.

Similarly Growthpoint’s second acquisition from Tresso of R1,4 billion has accrued to the company from  1 June 2006 when the company took transfer of a diversified, quality portfolio of 24 properties, and will have an equally significant effect on the year ending in June 2007.

Realising the property loan stock’s stated goal to increase its exposure to industrial properties, linked unitholders of Metboard Properties Limited voted in favour of the scheme of arrangement proposed by Growthpoint, whereby Growthpoint acquired all the Metboard linked units it did not already own.

All required conditions for the scheme of arrangement were fulfilled by 30 June 2006, the effective date, and Metboard’s balance sheet at 30 June 2006 has been consolidated into the group’s figures.  On Monday, 21 August 2006, Metboard linked unitholders received 1 new Growthpoint linked unit for every 1.9 Metboard linked units held on the record date, 18 August 2006, increasing Growthpoint’s market capitalisation to over R10 billion.

“This acquisition will be enhancing to existing Growthpoint linked unitholders from the first year,” says Sasse. “The industrial property sector is poised to start showing good growth in rentals as strong demand for space has seen industrial vacancies across the country decline to levels of below 2%.”

In November 2005 Growthpoint launched its R5 billion commercial mortgage backed securitisation programme with an issue of five-year notes to the value of R805 million, the largest CMBS issue at the time in South Africa. The issue attracted strong investor interest and achieved an average margin of 47 points. In June 2006 the company issued a further R969 million five-year notes at 45 points margin.

Sasse explains that the proceeds of these CMBS issues were used mainly to finance the cash portions of the first and second Tresso acquisitions, with the surplus being used to repay more expensive debt.

A further R1 billion CMBS issue is planned to take place on 7 September, explains Sasse, mainly to finance the Metboard acquisition, contributing significantly to the enhancement that the Metboard deal will bring. Following that, a R1,5 billion issue is planned for October.

“This will result in the refinancing of existing, more expensive debt and should equate to annual interest savings of approximately R14 million,” says Sasse. This will mean that Growthpoint has completed the refinancing of its total debt portfolio over the past 12 months.

Growthpoint sold the bulk of the listed property portfolio in the period from January to June 2005. Subsequent to 30 June 2005, the company sold the balance of its Hyprop linked units, and no longer holds any linked units in other property companies.

Growthpoint’s linked units continue to enjoy high levels of liquidity and tradeability. During the year to 30 June 2006, R4,4 billion of Growthpoint linked units traded on the JSE Securities Exchange, representing 59% of units in issue. The monthly average value traded was R366,8 million.

The value of investment property increased by R1,6 billion following the discounted cash flow valuation carried out for the entire portfolio as at 30 June 2006.

Growthpoint’s industrial portfolio increased substantially as a result of the acquisition of 163 Metboard properties valued at R2,4 billion. The purchase of the portfolio of 24 properties from Tresso for R1,4 billion, at an initial forward yield of slightly over 9%, included two prime retail properties -- a 66% share in Lakeside Mall in Benoni and Hatfield Plaza in Pretoria. A further seven properties were acquired in individual transactions during the year for R360,2 million which are expected to show a combined yield of slightly over 10% on cost in the year to 30 June 2007.

“Strong demand from purchasers enabled Growthpoint to dispose of 15 older properties which no longer met the criteria of core long-term investments, for a total consideration of R214,1 million. A surplus of R24,7 million over the June 2005 book value and R49,4 million over original cost was realised on all these disposals,” notes Sasse.

Including the Metboard industrial portfolio, vacancies at 30 June 2006 were 2,9% of gross lettable area across the entire portfolio, with industrial a mere 2%, retail a low 2,7% and a marked decline in office vacancies from 7% a year ago to 5,2% at 30 June 2006.

“The low vacancy levels, together with the high increases in construction costs which will limit new supply, points to upward pressure on rentals in the near future,” says Sasse.

End

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