The largest JSE-listed property company, Growthpoint Properties, says it has seen little activity in terms of acquisitions in the past 18 months.

Growthpoint owns a high-quality portfolio of 431 geographically and sectorally diverse properties in South Africa spanning 4,469,174 m2 and 25 properties in Australia covering 731 834 m2. The South African properties 
represent 86% of the total portfolio by value and gross let-
table area.

“We only bought two buildings this year, the Celtis Business Park, in the growing Stormill industrial node, on the West Rand, for R50-million, and 13% of Lakeside Mall, in Benoni, for R102-million,” Growthpoint Properties CEO Norbert Sasse said at a recent presentation.

Growthpoint Properties Australia acquired a distribution centre in Goulburn, at a forward yield of 9,9%, in December 2009. The acquisition was funded from existing syndicated debt facilities provided by financial institutions for A$65,5-million (R467-million).

He added that the company had also witnessed the manifestation of the ‘bid/ask spread’, which 
refers to the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell.

“The sellers want 7% to 8% for their properties as a yield and the buyers want 10% to 11% and, 
because of this, there were no deals.”

Sasse hastened to add that, in the past six months, the bid/ask spread narrowed from both sides and some transactions were 
expected to take place.

“We have no distress sellers but we have to come to terms with the fact that buyers need to pay more for good-quality acquisitions. On the other hand, we have had an active year in terms of disposals 
and we sold seven properties to the value of R657-million at a R55-million profit on the June 2009 book value and R301-million profit on cost.”

The revaluation of Growth-point’s properties resulted in an upward valuation of South African properties of R700-million, equating to 2,3%, bringing the total value to R30- billion.

About R110-million of the R700-million South African property revaluation relates to the properties held for sale, 
included in current assets at 
June 30 at a value of R629-million. On the Australian portfolio, an 
upward revaluation of R165-million, or 3,5%, was made, bringing the value to R4,9- billion.

Growthpoint is exiting the Pretoria central business district because it says that it does not like the dynamics of doing business there.

“There seems to be no available tenant market ready to occupy 
our buildings, other than government. 
“We do not want to have one user in all our buildings and that is the reason that we are systematically exiting Pretoria,” 
explained Sasse.

He assured that the company was always looking at growing its portfolio as well as improving its quality.

In maintaining and enhancing its property portfolio during the period, Growthpoint invested some R589-million on developments, expansions and upgrades within its portfolio.

“The growth of property 
expenses has been somewhat 
escalated by rapidly increasing recoverable occupation costs, such as electricity and assessment rates, while revenue has been somewhat constrained by a marginal increase in vacancies and rentals coming under pressure,” Sasse noted.

However, the group also 
believes the cycle has turned, with debtors and arrears having stabilised and vacancies having peaked.

This ‘gradual’ recovery will positively impact on occupancy 
levels over the next 12 months as demand in all three commercial property sectors has started 
to improve.

“Growthpoint’s positive performance is significant, given the effects of the global financial 
crisis and the recent recession in South Africa. We are confident that we have come through the worst. Already an improvement in the overall position is evident.”

Nevertheless, rental levels, 
especially in the office and industrial sectors, will remain under pressure as the company seeks to renew leases for about 18% of the total gross lettable area during the next 12 months.

“Real rental growth will 
return once national vacancy factors drop below 5%.”

The total vacancy level in Growthpoint’s South African portfolio was 6,4% at the close of the year, up only 1% on the prior year’s figures. The industrial sector was most affected by the poor economic conditions experienced over the past year, with vacancies growing from 4,4% to 6,7%. Office vacancies remained largely 
unchanged at 9% and retail vacancies reduced marginally from 3,2% to 2,7%. There were no vacancies in the Australian portfolio.