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Aug 29, 2012

Growthpoint distribution rises 6.1%, office demand remains weak

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JSE-listed property group Growthpoint on Wednesday reported that, despite a 12-year low in business confidence, uncertain global economic conditions and lower office demand, the company achieved a 6.1% distribution growth for the year ended June 2012.

Improved portfolio occupancy levels and arrears management, as well as the positive performance of Growthpoint Properties Australia (GOZ) pushed the distribution from 131c in 2011, to 139c a linked unit, said CEO Norbert Sasse.

Overall, group vacancies fell to 4% in 2012, from 5% in the prior year, with the group achieving a renewal success rate of 75.2% in 2012, up from 2011’s 65.8%.

Sasse noted that total arrears fell to a near-record low of 6.5% of total monthly collectables at R32.6-million this year, compared with R34.8-million, in 2011.

The office sector, which was expected to remain weak over the next year, proved to be challenging during the year under review. However, on the back of aggressive leasing strategies, including lowering renewal rentals, vacancies in Growthpoint’s office portfolio fell from 8.1% to 5.8% during the year, with renewal success rates of 74.6%. Renewal rental growth fell to -1.5% in 2012, from 2.1% in the prior year.

Sasse said that the company was focused on strategies aimed at increasing demand in the office sector and, in line with this, was developing a portfolio of assets along the Gautrain route to entice better office rentals.

This included the proposed R700-million, 35 000 m2 Rosebank office development, near the Rosebank Gautrain station; the R105-million, 6 700 m2 Midrand Town Centre, of which 2 500 m2 would be let to the Gautrain Management Agency, near the Midrand Gautrain station; and the 25 000 m2 Lakeside Centurion office development, close to the Centurion Gautrain station.

Further developments included a potential 200 000 m2 mixed-use development near the Central Pretoria Gautrain station, for which Growthpoint was still securing the rights, and a development near the Hatfield Gautrain station.

Meanwhile, Sasse stated that the industrial sector had a “good run” with solid trading conditions, and continued positive demand for warehousing and distribution units. Vacancy rates fell to 3.4% in the year ended 2012, from 4.3% in 2011, with a renewal success rate of 74%, up from 63.1% in the prior year. However, renewal growth rates dropped to 4% in the year under review, compared with 7.1% in 2011.

The retail sector also recorded a positive performance with a vacancy rate of 3.1%, a renewal success rate of 81.1% and renewal rental growth of 6.7%. Arrears dropped from R16.9-million in 2011, to R14.8-million in 2012.

The company also committed R780-million for retail redevelopments, refurbishments and extensions for Brooklyn Mall, which would account for R250-million over the next 18 months, Kolonnade, River Square, Northgate, Waterfall Mall and Walmer Park.

In its first full year under Growthpoint, the V&A Waterfront, in Cape Town, recorded vacancy rates of 1.6%, compared with 3.5% in 2011, with a renewal rental growth of 2.7% and renewal success of 83.7%.

Growthpoint bought 50% of the V&A Waterfront for R4.9-billion, in partnership with the Public Investment Corporation, last year.

The group reported that the Clock Tower Precinct redevelopment was completed and recorded an occupancy of about 73%, while the Food Court refurbishment would be complete by November 2012 and the new 18 100 m² Allan Gray head office development was on track to be complete by September 2013.

AUSTRALIAN GROWTH

Meanwhile, the group’s Australian assets remained a strong focus as the transactions and yields in the Australian market “surpassed many local opportunities, representing a better use of capital”, commented Sasse.

Growthpoint invested a further R1.5-billion in GOZ in two rights issues, growing its total investment to R3.1-billion. Growthpoint’s 64.5% holding in GOZ held a market value of R4.3-billion.

Growthpoint, with a market capitalisation of R40.1-billion at June 30, reported that, for the first time, its combined property assets reached a value of R53.1-billion.

The group had 403 properties in South Africa worth R35-billion, as well as, through its 64.5% holding in GOZ, 41 properties in Australia valued at R13.1-billion. Its 50% interest in the V&A Waterfront alone was valued at R5-billion.
 

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online

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