“Growthpoint continues to deliver solid improvements in all key financial ratios. The property expense ratio has decreased, the loan-to-value ratio has been strengthened, and vacancies are down,” says Growthpoint Properties Limited CEO Norbert Sasse.
“We are pleased with this exceptional set of results.”
The growth in distributions for the first half of the year, to December 2006 was 15.0% and reduced slightly to 14.5% in the second half of the year ending June 2007 as a result of a significant increase in the asset management fees paid by the company.
“The movement in distribution growth in the second half of the year is a direct consequence of those higher asset management fees, which are based on increasing market capitalization and debt levels,” explains Sasse.
Critically, the results validate the fund’s strategic decision earlier this year to internalize its asset and property management functions after a rising share price of R3.20/unit in the second half of the year pushed management fees up by R8.5 million.
“It confirms that we took the right action by “buying-in” the management company.”
Growthpoint unitholders approved the management “Buy-in” and the establishment of a staff incentive scheme in a meeting held on Tuesday 21 August 2007 and the only remaining suspensive condition for the transaction to be concluded is the approval by the Competition Tribunal which is expected by the end of August 2007
Growthpoint’s performance continues to look positive going forward, with plans to buy and develop more prime properties, leverage strong market fundamentals, and escalate international investor interest all on the agenda.
“Growthpoint’s acquisition and development pipeline includes about R4 billion of quality properties in prime positions with top-notch tenants and blue-chip leases,” says Sasse.
The list includes: The Place at 1 Sandton Drive; Woodmead Retail Park; Paramount Towers in Claremont, Cape Town and the extension of 100 Grayston Drive for Investec.
Vacancy levels are at an all-time low, he says. Rental increases are coming through strongly in the industrial sector, while the retail and office sectors are performing well. Renewals and new leases are forecast to achieve current escalations of 8%-9% being seen across the portfolio.
“These built-in escalations will substantially contribute to distribution growth going forward,” he explains.
Another coup for Growthpoint is a sizeable increase in international investor interest, with foreign shareholding increasing from below 2% to 5% during the past year.
“This includes international pension funds and emerging market funds,” adds Sasse.
With strong fundamentals, Sasse points out, the portfolio is positioned to perform well going forward and we are confident of achieving distribution growth significantly above inflation for next year.
