FURTHER consolidation in the listed property sector appears imminent, with Growthpoint and Acucap announcing yesterday that they were in discussions.
Growthpoint acquired in April a strategic 34.9 percent stake in Acucap and a 31.5 percent stake in Sycom Property Fund in a transaction valued at R4.66 billion.
The acquisition occurred at a time when Acucap and Sycom were in the process of a proposed merger.
Norbert Sasse, the chief executive of Growthpoint, said at the time that Growthpoint’s acquisition had secured strategic stakes in both companies and as a major investor in both entities, the company supported the merger plans that were on the table.
“We are exploring options and alternatives available to us to eventually take control of the merged entity, which we intend to discuss with management and the board of Acucap when appropriate,” he said.
After the end of its financial year to June, Growthpoint took up a switch offer from Acucap, which changed its holding to 34.7 percent in Acucap and 15 percent in Sycom.
Growthpoint and Acucap did not provide any further details about the discussions in their cautionary announcement.
Growthpoint reported yesterday that it had lifted distributions for the year to June by 8.3 percent to R1.613 a share from R1.49 a linked unit in the previous year, beating its forecast growth in distributions of 7.2 percent for the year.
Sasse said the results were enhanced by growing distributions from its 64 percent stake in Growthpoint Properties Australia due to favourable exchange rate movements.
Distributions from Growthpoint Properties Australia grew 13.5 percent in rand terms on a like-for-like per unit basis and contributed 14.7 percent of Growthpoint’s total distributable income.
Growthpoint’s South African property portfolio contributed 75.8 percent to its distributable income. Distributions from Growthpoint’s 50 percent stake in the Victoria & Alfred (V&A) Waterfront in Cape Town increased by 9.5 percent on a like-for-like basis and contributed 9.5 percent to distributable income.
The Public Investment Corporation owns the remaining half.
Sasse said the V&A Waterfront seemed largely insulated from the challenging conditions affecting commercial property in South Africa.
“This is partly driven by tourism and the weaker rand as well as a revival of support from our locals. Its retail sales recorded year-on-year growth of 21.5 percent and there is keen demand from retailers and general demand across all uses.”
Sasse said the V&A Waterfront was also winning mandates for new corporate head offices and its hotel market was picking up.
Growthpoint invested R276 million in development and capital projects at the V&A Waterfront during the year and has also committed R496m for its contribution to new enhancing developments, including the development of the new Zeitz Museum of Contemporary Art Africa in the historic Grain Silo.
During the year, Growthpoint made new investments worth about R15bn, which included the acquisition of two property portfolios in Gauteng with property assets of R7bn.
Total revenue in the year increased by 14 percent to R6.6bn. Property expenses rose by 12 percent to R1.38bn.
Vacancies in the South African portfolio, excluding the V&A, increased from 4.4 percent to 4.9 percent at year-end. Overall vacancies grew from 3.6 percent to 4.2 percent.
Sasse said that with the low growth macroeconomic conditions, rising interest rates and soft demand across all property sectors, Growthpoint’s operating environment was set to remain challenging in the year ahead.
But he said Growthpoint was in a strong position and likely to deliver growth in distributions in its 2015 financial year in line with its average five-year distribution growth rate of between 7 percent and 7.5 percent.
Growthpoint fell 0.97 percent to R25.54 yesterday. Acucap gained 1.85 percent to R47.47.