Hard-pressed retailers force Growthpoint to look offshore
Growthpoint Properties is on track to achieve its income targets for financial 2017, but says the company is concerned about the pressure on local retailers in a struggling South African economy.
Norbert Sasse, CEO of the largest local real estate group, said in an investor call before the close on Thursday, that Growthpoint had implemented strategies aimed at increasing the contribution to its earnings by offshore assets from 19% to 30% within the next three to five years.
"Retailers are under pressure. Many are seeking shorter leases. This can change when they choose to close branches. So overall these are tough times for retailers. At least, many of them are pulling back regarding developments so we won’t increase the oversupply of retail," said Sasse.
The weak South African economy was part of the rationale to expand abroad.
"In line with this, during the nine months to March 31 2017, we invested circa R1.6bn into GOZ [Growthpoint Australia] through the Drip [Distribution Reinvestment Plan] process and by underwriting the GPT Metro office transaction."
Outside SA, Growthpoint has invested in Australia and recently in Romania.
"The eastern coast of Australia is very hot as an investment destination. You could say this part of Australia and SA are basically from different galaxies currently in terms of investment appetite. We recently increased our stake in Growthpoint Australia to 65% and are looking for more income generating properties in the country.
"In order to get 30% of our bottom line coming from offshore sources we will invest further in Australia but also are considering other countries. Our investment in Globalworth Real Estate is a platform into central and eastern Europe," said Sasse.
Growthpoint Australia was expected to achieve 2.3% growth in distributions for the financial year to 2018.
The company was looking to sell 5% by value of its total R75bn South African portfolio.