Derek Greenberg: CEO, Growthpoint Properties Ltd

Posted On Friday, 07 November 2003 02:00 Published by eProp Commercial Property News
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Interview with Derek Greenberg

Derek GreenbergMONEYWEB: The big deal of the day is a R975m acquisition by Growthpoint Properties of the Sandton and Cape Town offices of Investec. Derek Greenberg from Growthpoint joins us now. Derek, when we see Investec selling properties to a property trust and bought by institutions, one has to start wondering whether the top of the market is not nigh. DEREK GREENBERG: Alec, we are really excited and positive about this deal. It’s got substantial positive effect for Growthpoint. Whether the top is nigh – I think that interest rates are still on their way down. If you heard the recent report earlier on in your programme, about reductions in December, all of that is positive for our sector. So I’m not sure that the top is nigh.

MONEYWEB: What kind of yield will you achieve out of these Investec buildings?

DEREK GREENBERG: It’s a steadily growing yield over the period of the lease. It’s starting around 9%, but it’s growing over a 20-year period, because we have a 20-year triple net lease from Investec.

MONEYWEB: What does that mean?

DEREK GREENBERG: That gives us a solid sustainable growing rental income from Investec for the 20-year period. So each year it will escalate by an average of 7.7%, from start to the end of the lease.

MONEYWEB: But the "triple income" – what exactly is that?

DEREK GREENBERG: It means that we bear none of the expenses. What we get once a month from Investec will be our net receipt, and we won’t have to bear any expenses for the entire period.

MONEYWEB: All right. Your portfolio is now at R5.8bn. So if you put a billion onto that, these two Investec buildings share is quite a hefty chunk of the overall portfolio.

DEREK GREENBERG: That is correct, it’s about 15% in terms of asset value, and about 13% in terms of income. The reason we’ve done it is that it gives us a solid sustainable growing base of income in the portfolio.

MONEYWEB: Derek, who did you buy the buildings from?

DEREK GREENBERG: It was from companies that were associated in some way with Investec. They had previously sold off the income stream, and we bought it from those companies who owned the income stream.

MONEYWEB: And is there any particular reason why they would be selling? Did they need to do that?

DEREK GREENBERG: No, I don’t think they needed to. But I’m actually not talking for Investec.

MONEYWEB: No, but sometimes in these structures, there’s a need to unwind them – and that’s all I wanted to know from you. You’ve got big ideas for your company, you expect it to get into the Alsi 40. Have you set yourself a time limit for that?

DEREK GREENBERG: We haven’t in the foreseeable future, depending on what happens in the market. But we, after this transaction, will have a market cap of R4.3bn. So we are pretty close to being there at the moment.

MONEYWEB: Derek Greenberg, the chief executive of Growthpoint Properties. David Shapiro, last night we spoke with Simon Pearce, who is with Mariott and probably the expert, on property valuations and so forth. He took a big bet on Growthpoint in the last quarter, but he did say that he bought it a lot lower down than the current share price, and I see this deal today – the current share price is over R6, R6.38 – this deal was done at R5.75. So R6.38 he thought was a bit rich?

DAVID SHAPIRO: I think he thought a bit rich.

MONEYWEB: What do you think?

DAVID SHAPIRO: The kind of frantic activity that we’re starting to see in the property market is evident of the top of the market. It can go on for a bit – there could still be a bit of momentum. But when Investec or companies start to sell big buildings now and cash in, and the shares now get placed onto institutions, you know kind of top end of the market. But the other thing, Alec, is watch the long-bond rate. We are starting to see a reversal. And that’s going to start to threaten. I think that there is a sea change taking place at the moment.

Last modified on Friday, 09 May 2014 14:55

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