Growpoint Properties, the largest property company on the JSE Securities Exchange SA by market capitalisation and assets, yesterday reported a 6% surge in distributions for the six months to December (SUBS: 2004), compared with the same period the previous year.
Norbert Sasse, CEO of Growth point, which has a market capitalisation of R5,5bn and prop erty assets worth more than R8,2bn, said yesterday he believed the distribution was ahead of market expectations.
He also said it was achieved despite the negative effects on its net property income from of long-term head anchor tenant leases with national tenants in two retail centres coming to an end.
Sasse said the two centres in question were Mark Park in Vereeniging and Palm Springs in Springs. "Both those centres were let to major national retailers on head leases. These head leases have been in place for 10 years, and escalating at 12%, and when that lease expires the rent they pay at expiry is significantly higher than market rentals," said Sasse.
He said that in both centres the retailers opted to stay in the centre, but signed leases for over reduced space at lower rentals. This had a negative effect on the net property income these centres produced. Sasse said the boost to distributions was due to the company’s operating margins improving from 67,4% to 70% as a result of better cost controls and low vacancy factors.
as well as and The inclusion for a full six- month period of the Investec head office buildings in Cape Town and Johannesburg also boosted the group’s performance. The Investec buildings were purchased by Growthpoint with effect from 1 April 2004 at just under a R1bn.
Sasse said the leases signed with Investec Bank were triple net leases, which meant the bank, and not Growthpoint, was responsible for paying all expenses relating to the maintenance of the building.
Catalyst Securities MD Andre Stadler said the distribution growth was marginally ahead of their expectations. , but broadly reflected the improved fundamentals of the property market, with vacancies coming down and improved operating expense ratios.
About 4,7% of Growthpoint’s 1,5-million m² property portfolio is vacant.