Growthpoint pursues Healthcare Properties, boosts offshore exposure
Growthpoint Properties (JSE: GRT), is exploring new avenues of growth in keeping with the changing business landscape, while expanding its portfolio of core businesses domestically and internationally.
SA’s largest real estate investment trust (Reit) Growthpoint Properties, on Wednesday announced financial year results ended June, beating its market guidance thanks largely to a good performance from its investments as a whole, along with new income streams introduced this year.
The company increased its annual distributions 10.4%, paying R5.6bn to shareholders this financial year. It also made significant strategic progress, boosting its international exposure to 30.0% of its asset value of R122.3bn, assembling a portfolio of assets for its new Healthcare Fund and receiving income from its new Trading and Development business for the first time.
It has added five assets with a property value of over R2.3bn to its Healthcare Fund and plans to grow the fund’s assets to R10bn in the next seven years.
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Capital raising for the Africa Fund, in partnership with Investec Asset Management and the IFC, has achieved mixed results with its first close targeted for Q4 2017.
In South Africa, Growthpoint concluded 11 acquisitions for R1.9bn. All were strategic transactions, and three of the assets acquired, totalling R1.5bn, are for its Healthcare Fund.
Its biggest development is the new global headquarters for Discovery in Sandton Central, which Growthpoint is developing with Zenprop. The property is owned by Growthpoint (55%) and Zenprop (45%). The 110,000sqm environmentally-innovative building is the biggest single-phase commercial office development in Africa. Discovery is expected to take occupation from the beginning of 2018.
The group increased its dividend by a marginally higher than expected 6.5%, to 195.8c.
Commenting on the results, CEO Norbert Sasse says: “Growthpoint delivered distribution growth ahead of guidance in an extremely tough South African market where any growth is good growth.”
Looking forward, the group said it expected dividend growth for the present financial year to be similar to that of 2017.
For 2017, gross revenue increased by 9.8%. Headline and diluted earnings amounted to R5bn from R3.8bn in 2016. Distributable income growth grew 10.4% to R5.6bn.
Retail sales grew by 3% and trading density by 2% at V&A Waterfront, both coming off a high base.
The vacancy rate in SA improved to 4.4% from 5.7% in 2016.
Growthpoint is the largest listed real estate investment trust (Reit) on the JSE, with total assets of R122.3bn, of which 30% are situated offshore.
It owns 471 properties in SA, valued at R76.9bn, as well as two material equity-accounted investments.
Growthpoint’s share of properties in these two investments is valued at R12.9bn, of which the V&A Waterfront is the largest at R8.7bn.
The other equity-accounted investment is Globalworth Real Estate Investment Limited, of which Growthpoint acquired a 26.9% stake during the period, valued at R4.2bn.
In addition Growthpoint has a 65.1% interest in Growthpoint Properties Australia (GOZ), which owns 57 properties in Australia valued at R32.5bn.
Growthpoint shares are down 4.52% so far this year and closed at R24.72 on Tuesday.
Ron Klipin of Cratos Wealth said Growthpoint needed to find strong offshore opportunities in order to mitigate weaknesses in its South African portfolio.
“Even in the face of South Africa’s inadequate economic growth prospects and weakening domestic property fundamentals, we will preserve our risk profile while remaining driven by opportunity and demand. We will seek ways to outperform and continue to create sustainable value for our shareholders,” concludes Sasse.