Gemgrow Properties, a specialist high-yielding property group, says it plans to do deals with large real estate investment trusts (Reits) that are facing structural problems and need to let go of their smaller assets.
Gemgrow is trying to attract investors wanting to buy into a company with a South African portfolio as opposed to many larger funds that have invested abroad and now have to manage more risks.
“Our strategy is to be a very acquisitive real estate investment trust.
“We are a high-yielding, high-growth group and have been buying assets from private buyers but also from large Reits who may be overindebted and sitting with assets worth up to say R100m,” said chief operating officer Alon Kirkel.
Releasing financial results for the six months to March, he said Gemgrow would be an aggressive buyer of assets in SA for the rest of 2018, while other funds may be more cautious in a slow growth economy.
Gemgrow made acquisitions worth R549m during the first half of its financial year, growing its asset base to R5bn, results showed. Its market capitalisation sat at about R3.3bn.
“We are probably the most acquisitive Reit in the sector at the moment, on a relative basis. Larger funds are having to be quite cautious in SA, but we can buy many assets at high yields without diluting our earnings,” said Kirkel.
Gemgrow operates with an A and B share structure, catering for different risk preferences.
The group declared an A share dividend of 52.18c and a B share dividend of 38.52c in line with its guidance.
The group’s debt-expiry profile improved to 3.8 years from one year. Its vacancy was at 9%.
Metope Investment Managers investment analyst Kelly Ward said Gemgrow’s distribution results were in line with expectations and strategy as communicated to the market, but its physical property performance was a bit disappointing.
“Vacancies increased across the board. However, this was due to properties they acquired with vacant space rather than a deterioration in their tenancies,” she said.
Rael Colley, a real-estate analyst at Anchor Stockbrokers, said Gemgrow’s results had more positives than negatives and it was promising that guidance for B-class distribution growth for the full financial year of between 7% to 9% was still intact.
“Many other locally focused funds have lowered their guidance as of late,” he said.