This is the largest transaction of its kind in South Africa and the fourth issue under Growthpoint’s innovative and uniquely-structured commercial mortgage backed securitization (CMBS) programme. In less than 12 months Growthpoint has effectively achieved a total value of R4,3 billion for the ambitious programme, substantially reducing its cost of debt and benefiting unitholders.

The Growthpoint CMBS programme launched in November 2005 with an initial issue of R805 million. The second issue in June this year was higher at R969 million and was followed by a third issue, secured by the Metboard industrial property portfolio, of R1 billion in September 2006.

Growthpoint, managed by Investec Property Group, is South Africa’s largest JSE-listed property holding and investment company, with property assets in excess of R15 billion. This latest issue comprises R1,566 billion of 3-year floating rate notes linked to the 3-month Jibar (Johannesburg Interbank Agreed Rate), a daily South African money market rate.

Security for the issue is provided by 23 properties with an open market value of R3.1 billion, with a loan-to-value ratio of approximately 50%. The bulk of the properties were acquired by Growthpoint as part of the R5 billion merger with Primgro Properties Limited in May 2003.

“This, the largest securitisation tranche to date, will result in substantial savings, certainly compared to conventional bank funding, with Growthpoint’s margin of debt being reduced by approximately 1,2%,” notes Growthpoint’s CEO Norbert Sasse.

“This will benefit Growthpoint’s linked unitholders with increased distributions. Additional benefits include the lowered average cost of borrowings and the increased competitive advantage of Growthpoint to make value-enhancing acquisitions,” explains Sasse.

Furthermore Sasse points out that the costs of this securitisation are reduced as Growthpoint is tapping into an existing structure put in place for the initial issue by the Investec Debt Capital Markets team, lead arranger and manager of Growthpoint’s securitisation.

“Investec remains committed to assisting Growthpoint to realise the financial objectives of its unitholders while still retaining significant operational flexibility.  We are appreciative of the levels of support consistently shown by institutional investors in the successive issues under this debt program. The extremely competitive pricing achieved on the latest issue is encouraging,” says Nick Job, Head of Investec Debt Capital Markets.

Growthpoint has been satisfied with the success achieved in all four of the issues which, Sasse notes, reflects both the quality of Growthpoint’s properties and property management as well as the efficient manner in which the transaction was executed by the Investec Debt Capital Markets team

“This concludes the effective refinancing of Growthpoint’s existing debt through securitisation. Using securitization to access debt capital will however remain a key part of Growthpoint’s future funding plans on the back of new acquisitions,” says Sasse, who notes that approximately 75% of Growthpoint’s existing borrowings are now in the form of securitised debt.