By Nick Wilson

Growthpoint Properties, the largest listed property company on the JSE with a market capitalisation of more than R15 billion and property assets worth more than R20 billion, reported on Thursday that its distributions for the six months to December had surged 15,1% to 45c.

CEO Norbert Sasse said the growth in distributions was "purely from the underlying property portfolio".

Growthpoint's policy is not to distribute any capital profits.

Sasse said rentals were "increasing" and that rental escalations were also benefiting the company.

Growthpoint had also experienced an improvement in its vacancy level from 2,9% at year-end in June last year to 2,8%.

"Once you hit these kind of levels it is almost difficult to go lower. For practical purposes, when you reach vacancy levels of below 2% the portfolio is ostensibly fully let. We could probably still improve to closer to 2%."

Sasse said there was strong demand for all types of property space.

Growthpoint?s property portfolio consists of a mix of office, retail and industrial properties.

In a R3,3 billion deal, Growthpoint also recently acquired listed loan stock company Paramount Property Fund.

Growthpoint's market capitalisation has surged from R13,5 billion last month to about R15,9 billion on Thursday. Sasse said he believed the major run in Growthpoint?s unit price was due to the fact that Growthpoint had previously been slightly "underrated by the market".

He said Finance Minister Trevor Manuel's budget speech had also positively affected Growthpoint and the listed property sector in general.

"The consensus is that it (the budget) is pretty good news for listed property, the main reason being the scrapping of the taxation on interest for pension funds," he said.

Before the budget announcement, pension funds were taxed at 9% and this had now been pushed "down to nil".

"Pension funds investing in listed property now would pay no tax on the distribution whereas in the past they paid 9%."

Sasse said the effect of the budget speech could be seen in Growthpoint?s unit price movement.

The company's unit price closed at R13,80 the day before Manuel delivered his budget speech.

After the budget speech it closed at R14,32. It was trading at R14,90 on Thursday afternoon.

Sasse said the company's good financial results had also assisted the unit price movement.

Macquarie First South property analyst Leon Allison said Growthpoint had delivered a "strong performance like we've seen from the rest of the sector, as well".

He said Growthpoint had delivered growth above the listed property sector's average distribution growth.

Distribution growth from the sector on average had been 11%-12%.

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Publisher: I-Net Bridge
Source: I-Net Bridge