Growthpoint CEO Norbert Sasse has expressed some regret that the distressed selling of quality property has not materialised in SA - unlike on Wall Street and in the City of London, where many prime properties have changed hands for a song. Most SA listed property companies could have done with a stock of low-priced properties, on high forward yields, to improve their returns.
As it is there have been slim pickings for property companies. Growthpoint acquired just one R50m property, the Stormill Industrial Park, in the six months to June; and in the whole of 2009 SA Corporate bought only an industrial property next to its existing buildings in Jet Park.
After the 11%-14% growth in distribution from funds such as Resilient, Capital and Pangbourne in the early part of the reporting season, the most recent results have been pedestrian - though still not wildly below analysts' expectations. SA Corporate, controlled by Old Mutual, had distributions 7% below 2008, Growthpoint 5% ahead and Hyprop, considered the quality pick of the property sector, up 6,5%.
Norbert Sasse - Office recovery lags behind economy
Growthpoint, with a portfolio of R34,6bn spread across office, retail and industrial properties, is a proxy for the whole sector, though its gearing of 30% is above average. And about 10% of its net worth is accounted for by Growthpoint Australia, which focuses on logistics and industrial space primarily for large retailers in the State of Victoria.
Sasse says he believes that new retail developments in SA are unlikely to find support from retailers but extensions to existing retail space in the better-rated centres will continue.
Hyprop has completed two large extensions - 15 000 m² at Canal Walk north-east of Cape Town and 19 000 m² at The Glen, the top regional shopping centre in southern Jo'burg.
These are 100% let, but the same cannot be said of its Stoneridge centre, in northeastern Jo'burg, which opened in September 2008, with strong competition from nearby Greenstone. Stoneridge has a vacancy rate of 22,7%. Sasse says centre managers will tolerate some arrear payments just to keep tenants in the centre.
The Growthpoint portfolio is 2,8% vacant with a modest increase in arrears from R19,7m to R21m.
SA Corporate, with a portfolio primarily of smaller centres, has 9,3% vacancies. This will decline when its upgrading of Northpark Mall in Pretoria is finished - but according to Stanlib estimates, Pretoria has the highest proportion of shopping centre space per head of any major city in SA.
SA Corporate is finally going through the surgery it needs if it is not going to remain the poorest-performing property share in SA. Under new MD Len van Niekerk, an investment analyst, it has sold R295m of noncore properties and there have been a further R106m of unconditional sales. There are R362m more disposals under suspensive conditions.
Sasse says he believes that the recovery in the office sector will lag the overall economic recovery by nine to 12 months.
There will be some wobbly times ahead for listed property but it looks as though there will be little increase in supply. Some equilibrium will come back to the market soon.
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