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Property companies feeling the pinch

By SA Commercial Prop News - I-Net Bridge 2015-09-09 11:30:00

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Growthpoint CEO Norbert Sasse said at the company’s annual results presentation last week that dividend growth was likely to slow to between 5% and 6% next year, down from 7,5% for the 12 months to June.

It will become increasingly difficult for real estate stocks to deliver inflation-beating dividend growth, if sector heavyweight Growthpoint Properties’ rather bearish earnings outlook is anything to go by.

That would be the lowest distribution increase reported by Growthpoint since 2004.

The main reasons Sasse gave for the slowdown were the worrying state of SA’s economy and the time it would take to bed down the R18,6bn takeover of Acucap/Sycom’s property portfolio.

Growthpoint’s assets, including a 50% stake in Cape Town’s R13,6bn V&A Waterfront, surpassed R100bn following the Acucap/Sycom deal.

Sasse said income growth from the company’s R10,9bn stake in Australian-listed Growthpoint Australia was also likely to come under pressure because of the expected increase in withholding tax on dividends paid to non-Australian shareholders.

“Also, we are budgeting for no further rand weakness against the Australian dollar.”

Meago Asset Managers director Thabo Ramushu describes Growthpoint’s outlook as disappointing. Though the V&A Waterfront is still performing well, Ramushu says office fundamentals remain particularly challenging, especially in Sandton, where Growthpoint has significant investments.

In addition, the restructuring of Acucap/Sycom’s debt appears to be a bit of an issue.

However, Old Mutual Investment Group portfolio manager Evan Robins believes Growthpoint remains a buy-and-hold for the longer term.

“The market is too obsessed with short-term numbers. Investors need to look beyond next year’s slower growth outlook as there are a few one-offs in the 2016 forecasts.”