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Send  Share  RSS  Twitter  16 Aug 2011

PROPERTY: Acquisitive Growthpoint Australia Catches Investors Eyes


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Institutional and private investors looking for a toehold in the Australian property sector are increasingly eyeing Growthpoint Properties Australia (ASX:GOZ), the listed property fund majority owned by SA-based mega-fund Growthpoint Properties Limited (JSE:GRT).

Recent acquisitions and a new rights offer are making GOZ especially attractive to SA buyers.

“Growthpoint’s investment in GOZ has paved the way for both listed property companies and individual investors in SA to access the Australian property market,” explains Norbert Sasse, CEO of Growthpoint Properties Limited.

“Institutional investors like SA’s Emira Property Fund, Oasis and Coronation have all seen the value in accessing the Australian property market through GOZ,” says Sasse. Since Growthpoint took up a major stake in GOZ in late 2009, the Australian property fund has also attracted increased interest from Australian investor including APN Property Group in Australia.

GOZ, which trades on the Australian Securities Exchange, focuses on building a diversified portfolio that reflects not only a geographic spread across Australia’s main states, but also a sectoral spread that includes quality office and industrial properties.

Sasse highlights active acquisitions combined with conservative financial management as cornerstones of the fund’s growth strategy.

The recent acquisition of Rabinov Property Trust in April by GOZ is a case in point.

The deal resulted in GOZ adding six strategic properties valued at Aus$184 million to its portfolio, bringing the total number of properties to 37 across Australia and increasing the value of the GOZ portfolio to Aus$1.2 billion. In fact, GOZ’s investment property portfolio has nearly doubled since Growthpoint’s initial investment and has diversified the fund from purely industrial properties to including a spread of 35% offices.

With a weighted average lease expiry of 8.8 years, zero vacancy rate, and balance sheet gearing of just on 50 percent post the rights issue, the portfolio is true to its aim of financial conservatism. The capitalization rate of the merged portfolio is 8.5 percent.

The next step for GOZ was an underwritten rights issue, concluded in July 2011, aimed at reducing gearing and creating a foundation for future expansion of the fund. “Growthpoint Properties took up its entitled rights issue,” confirms Sasse. Growthpoint’s holding in GOZ is approximately 61%, diluted from 67% prior to the Rabinov transaction.

The rights issue raised Aus$102.6 million, to be used for settling debt and additional land acquisitions.

Thanks in part to the Rabinov deal, GOZ is one of the largest direct property ownership funds in Australia – and one of only a few with a 100% distribution payout ratio.

For the 12 months to the end of June 2012, forecasts indicate a distribution of 17.5 cents per share, based on the current price of Aus$1.90. This represents a forward yield of 9.2%. Another feature attracting investors to GOZ is a low risk profile. Thanks to refinancing debt, and debt maturity moved to mid 2013, the fund is one of the lower risk investments in Australia.

As the relative liquidity and tradability of GOZ units increase, which will be furthered by the rights issue, GOZ’s shareholder base is starting to diversify too.

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