CAPE TOWN – GrowthPoint Properties, the biggest JSE-listed real estate investment trust, is in talks to acquire a majority stake in UK regional shopping centre landlord Capital & Regional.
Capital & Regional chief executive Lawrence Hutchings said yesterday that the talks involved Growthpoint making an offer in cash for Capital & Counties shares and an injection of capital to support the company's strategy through a subscription for new Capital & Regional shares.
Capital & Regional’s share price gained 6.45 percent to R3.30 on the JSE around midday yesterday, before closing at R3.33.
The group owns £800 million (R14.52 billion) of regional, dominant shopping centres in Blackburn, Hemel Hempstead, Ilford, Luton, Maidstone, Walthamstow and Wood Green, all in the UK. It also has a 20 percent joint venture interest in the Kingfisher Centre in Redditch.
Hutchings said in a presentation that he was limited by what he could say about the potential offer at this stage, but he was “pleased” that Growthpoint had “expressed interest” as it was a “confirmation of our strategy”.
Growthpoint’s main assets include more than 450 commercial properties in South Africa valued at R78.3bn.
Capital & Regional yesterday reported a pre-tax loss of £55.4m in the six months to June 30, compared with a £6.7m profit a year earlier, due mainly to a fall in property valuations, which was driven by chain store tenants in financial difficulties, and uncertainty in the UK retail property market.
Growthpoint is required to announce a firm bid by October 9. Further announcements were expected.
Growthpoint yesterday reported 5.3 percent growth in distributable income to R6.4bn, marginally ahead of guidance. The dividend per share was up 4.6 percent to 218.1 cents per share. Its share price fell 2.64 percent to R22.88 on the JSE yesterday.
Chief executive Norbert Sasse attributed the “positive performance” to two of the group's key strategies, internationalisation and generating new income streams from third-party trading and development and funds management.
“The road has not been an easy one, but we have delivered a robust set of results… in an incredibly harsh operating environment,” adding that Growthpoint’s size and diversity on three continents and across property sectors would continue to ensure that it remained defensive.
“While property fundamentals in South Africa have been weak, our international investments have performed well,” he said.
Dividend growth for 2020 was, however, expected to be “nominal, if any”, due mainly to a lack of gross domestic product growth and weak property fundamentals in South Africa, where 69.7 percent of the value of its assets are held.
“Domestic tenants continue to downsize their space, which is placing pressure on all property fundamentals. The oversupply of space… is also limiting the group's ability to grow rentals,” Growthpoint said.
The V&A Waterfront, which benefits from local and international tourism, was likely to generate growth, but it was not immune to the erosion in the domestic economy.