Growthpoint increases its Australia investment
Growthpoint is diversifying its income streams and has grown beyond R70bn
Growthpoint Australia (Goz), the subsidiary of Growthpoint Properties, the largest locally based property stock on the JSE, has bought 18.16% of Australian office and industrial-focused Reit, Industria, from 360 Capital FM for A$68.1m (about R700m).
Growthpoint is diversifying its income streams and has grown beyond R70bn.
Industria’s share price rose 3.98% in trade on the Australian Securities Exchange after the deal was announced.
Growthpoint CEO Norbert Sasse said the company wanted 30% of its bottom line derived from offshore sources and had chosen to invest further in Australia. About 19% of its earnings stem from offshore assets.
Growthpoint’s asset base, which includes half of the V&A Waterfront in Cape Town, is worth about R120bn on a consolidated basis.
Industria has a $552m portfolio that is geographically diversified with properties in Brisbane, Sydney, Melbourne, Adelaide and Newcastle.
The portfolio consists of an almost fifty-fifty mix of industrial and office properties, with a 96% occupancy, leases with an average term of 7.8 years and gearing of 35%.
Paul Duncan, an investment manager at Catalyst Fund Managers, said the acquisition would complement Goz’s portfolio and that much of Growthpoint’s attention was on Australia for the moment.
"Goz has been very active in Australia. Last year, they bought out another fund. I suspect if Goz raised money via an equity (placement), Growthpoint will support it. I know the Industria portfolio and it is complementary in terms of quality and earnings enhancing," he said.
The Industria investment comes soon after Growthpoint said it would launch a hospital property company.
Growthpoint Healthcare is expected to be worth R10bn in five years, after which it could be listed separately. The company, now has a R2.5bn portfolio, with two hospitals in Cape Town and two in Durban.
Duncan said Growthpoint’s and other South African real estate groups’ attempts to "move up the risk curve" to source alternative revenue streams were a consequence of very tough local conditions and a weak growth outlook in SA.
"We understand the temptation, but we are cautious and concerned that some companies are not qualified to take on this risk," he said.
Catalyst would be applying higher discount rates to these alternative sources of earnings to ensure that its investors were being compensated for the additional risk to which they were being exposed, Duncan said.