Norbert Sasse: Resilient fiasco harms entire listed-property sector
Too many investors had 'painted the whole sector with the same negative brush'
The debacle at the Resilient stable of companies has harmed the credibility of the entire R700bn listed-property sector, says the head of the largest SA-based real estate company.
Growthpoint Properties group CEO Sasse, who oversees R78.5bn of local assets as well as properties in Australia, Poland and Romania, said he and his team had been forced to reassure investors that it was business as usual for the JSE top 40 company.
Too many investors had "painted the whole sector with the same negative brush", Sasse said, noting that listed property had grown and developed into a large and diversified sector over the past decade to about 60 companies now.
"It would be misleading for the media and market watchers just to focus on the fact that the asset class as a whole was the worst-performing asset class in 2018 without actually considering stocks separately," he said.
The FTSE/JSE SA Property index has lost 23% in 2018.
The Financial Sector Conduct Authority (FSCA) has been investigating Resilient, Nepi Rockcastle, Fortress and Greenbay since March.
The FSCA’s market abuse department’s investigation is twofold. It is studying possible insider trading and price manipulation in the Resilient group companies’ shares; and false and misleading reporting regarding the Resilient group.
These companies’ share prices have fallen heavily in 2018, with their market capitalisation slumping about R120bn.
A group of large institutional investors, in a letter demanding that the Resilient group subject itself to an independent forensic investigation, said the FSCA’s probe was taking too long and that they wanted a "big four accounting firm" to look into the companies’ affairs.
Sasse, who spoke at the release of financial results for the year to June, said Growthpoint had been forced to spend some time assuring investors that it was well-governed and managed.
"We are working hard here in SA and abroad. We have always held ourselves to the highest levels of corporate governance," he said.
"The SA economy has been struggling to grow for a few years and we are all feeling it as corporate landlords.
"But if you look stock by stock, you will see that Growthpoint and a number of other SA-focused groups are performing well within a tough environment. These are companies which draw the majority of their income from rentals, which is then paid out as regular dividends, in sync with forecasts."
Analysts said Growthpoint’s financial results for the 12-month period, in which its dividend grew 6.5%, were in line with expectations and that the management team remained reliable. Growthpoint had forecast that its dividend growth would slow to 4.5% in the 2019 financial year.
"The results are not exciting, but expected, given the challenging economic environment and the guidance is marginally lower than market expectations," said Keillen Ndlovu, head of listed property funds at Stanlib.
Growthpoint’s balance sheet remained well capitalised and in line with a conservative gearing strategy, and its loan-to-value ratio stayed well within its covenants, remaining flat at 35.2%, Sasse said.
The group was working on a deal to sell a R5.8bn portfolio of local assets so that it could recycle capital for better uses.
Growthpoint’s share price closed 1.41% lower on Wednesday at R25.80, extending its 2018 decline to 6.72%.