Growthpoint distribution up 14%

Posted On Thursday, 23 August 2007 02:00 Published by eProp Commercial Property News
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Strong property fundamentals, improved letting and cost containment helped boost Growthpoint Properties’ distributions 14,5% to 93,1c, a linked unit for the year to June

Norbert SasseGrowthpoint, the largest listed property company with a market capitalisation of R16bn and property assets valued at more than R22bn, said on Wednesday the double-digit growth in distributions was "based on sustainable earnings derived from property net rental income and investment income".

Growthpoint CEO Norbert Sasse said the company did not distribute capital or development profits to its unitholders, as was the practice with some of the other listed property companies.

"We don't believe there is anything wrong in paying out capital profits, but we don't believe they are sustainable. Rental income is sustainable in terms of five-year leases. All of our income (that is paid out) is annuity income," said Sasse.

"We think this is a good performance in light of the fact that we do not pay out capital profits and development profits. This is purely because of rental income."

Growthpoint said such proceeds were reinvested in the company or used to settle debt. During the year under review the firm also grew its property asset base 48% to more than R22bn on the back of property acquisitions including the takeover of listed property loan stock company Paramount Property Fund.

The company's net asset value per linked unit also increased 24,3% to R12,75. Growthpoint delivered a total return of 47,5% to its unitholders for the year. In May this year Growthpoint announced it was opting for an in-house management strategy in line with international norms.

In terms of this the company would be acquiring its external property management and administration business for R1,57bn. Growthpoint is externally managed by Investec Property Group.

More than 92% of Growthpoint unitholders this week voted in favour of Growthpoint buying out the management company.

This transaction will be earnings-enhancing and Growthpoint would be more competitive in pricing new deals with the removal of the 0,5% asset management fee paid to external managers on every large property deal.

This would save Growthpoint R145m a year. Sasse said Growthpoint had a development and acquisition pipeline valued at R4bn over the next 12-18 months. Most of these acquisitions, developments and redevelopments would be completed within that period.

Stanlib listed property analyst Keillen Ndlovu said Growthpoint's results were a "clean set" as the "distributions only consist of sustainable income".

"The yields on the pending acquisitions, mostly single digit, are a sign of a strong physical property market. These acquisitions will initially dilute earnings if Growthpoint takes the debt-financing route," said Ndlovu. But he said Growthpoint's buyout of its external management company would be yield enhancing and counter this.

Last modified on Wednesday, 23 April 2014 15:51

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