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Growthpoint pins its hopes on Offshore Properties


With the local property industry adrift in choppy waters amid stagnant economy, Growthpoint Properties is looking to not only stay afloat but maintain robust growth by acquiring offshore properties.

Growthpoint, SA’s largest real estate company, which recently released financial results for its half-year to December 2018, said there are good opportunities to grow by acquisition in Central and Eastern Europe (CEE) as it looks to enhance investor value in the region.

Group CEO Norbert Sasse expects international investments to drive most of the company's growth in the 2019 financial year since they has been stagnation from its SA portfolio due to deteriorating conditions in the local real estate sector.

The company said property fundamentals in South Africa “remain weak and are worsening”.

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Although the V&A Waterfront benefits from local and international tourism, and is positioned to deliver growth, Growthpoint highlighted that it is not immune to the erosion in the domestic economy, with turnover rentals having declined in the interim period, despite the Cape Town water crisis now being under control.

However, property fundamentals remained strong in Australia, Growthpoint said. The group has a 66% interest in Growthpoint Properties Australia, which owns 59 properties valued at R38.3bn.

The company announced 5.9% growth in distributable income to R3.1bn with revenue from the group increasing 4.3% for its half-year to 31 December 2018, representing dividend growth of 4.5% per share for investors.

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Assuming no further deterioration in the SA business environment, Growthpoint expected growth in dividends per share for the financial year to end-June 2019 of about 4.5%.

The value of the group’s property assets rose 4.3% to R138.7bn.

Vacancy levels in SA rose from 5.2% to 6.5%. In the office sector specifically, vacancies rose to 10.2% from 8.4%.

Investments from Growthpoint’s third-party trading and development for the six months was R49-million and contributed 1.5% to the growth in distributable income.

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Growthpoint’s new funds management business, comprising Growthpoint Investec African Properties (GIAP) and Growthpoint Healthcare Property Holdings (GHPH) is on track to reach its target of R15bn in assets in the next three to five years. The USD212m raised on GIAP’s first close is expected to be fully invested by 30 June 2019. GHPH, which has a R2.6bn portfolio of five assets, has raised R700m of third-party funds and has a strong pipeline of both acquisition and greenfield development opportunities.

Meanwhile, additional offshore growth will come from Growthpoint’s Central and Eastern Europe investments in Globalworth Real Estate Investments (GWI), in which it has a 28.96% stake, and in Globalworth Poland Real Estate (GPRE), in which it has a 21.6% stake.

“The larger caps have been holding up the property sector distributions and this continues with Growthpoint’s results,” said Evan Robins, portfolio manager at Old Mutual Investment Group. “The headline numbers were not a disappointment,” Robins said. 

While the South African portfolio had not performed well, “offshore helped, as did a boost from low-quality income”.