The largest property fund in the country, Growthpoint, is taking a leading black economic empowerment (BEE) position within the property industry.
Growthpoint, which has a property portfolio valued at more than R20bn, has for the second consecutive year emerged as the most empowered listed property fund on the JSE, according to the 2008 Top Empowerment Companies (TEC) survey.
Led by CEO Nobert Sasse, Growthpoint is a property loan stock company that boasts some of the most prime property assets in SA. The portfolio features properties like Brooklyn Mall in Pretoria, La Lucia Mall in Durban and Northgate in Johannesburg. It generated revenue of about R2,1bn in the year ended June 2007.
The company produced a total BEE score of 52,75% in the TEC survey, but it was enough to propel Growthpoint to pole position among its peers on the JSE. With that score, Growthpoint is placed at 52 in the overall TEC ranking. The most empowered company on these rankings, Adcorp, produced a total BEE score of 81,69%.
This shows that the property sector has a long way to go when it comes to empowerment. Growthpoint's BEE journey can be traced back to 2003 when it struck the largest BEE equity transfer deal at the time. The R1bn deal delivered 14,2% of Growthpoint's linked units to a broad-based consortium led by the former National Prosecuting Authority boss Bulelani Ngcuka. The consortium also landed a 14,2% interest in Growthpoint's management contract, which until last year was held by Investec. The Investec arrangement came to an end when Growthpoint bought back the management contract for R1,65bn.
The consortium was made of three groups. Ngcuka's Amabubesi; Unipalm Investment Holdings group, led by Lazarus Zim; and Miganu Investments, which features former justice minister Penuell Maduna. Each of these companies earned a one-third interest in the consortium.
The deal was struck when Growthpoint had an asset base of about R7bn, at R10/linked unit, and was 100% funded. Growthpoint's asset base has since grown to about R22bn. Its market value has rocketed to about R20bn thereby delivering enormous value to the BEE partners.
On the back of the commercial property boom experienced in the past few years, Growthpoint linked units reached levels above the R17 mark in November last year. With recent market turmoil, its linked units have retreated to settle around the R15 mark. That should not hide one significant benefit of being invested in a property loan stock company like Growthpoint - these companies are treated as an income play by investors. That is because they are legally required to distribute a huge chunk of income to their investors.
But then the BEE shareholders have not been able to enjoy the full benefits of this run. That is not the making of Growthpoint but the general inability of BEE shareholders to follow their rights when enterprises engage in capital raising exercises. Property loan stocks like Growthpoint tend to raise capital for growth by issuing paper. But then, for lack of capital, BEE partners fail to follow their rights when this paper is issued. The result is dilution of BEE ownership.
To its credit, Growthpoint topped up its black ownership towards the end of 2006 through a deal that gave a consortium led by Herman Mashaba a 2,3% stake of its units. That saw the total black shareholding rest around 11%.
The property loan stock company scored 10,06% on BEE ownership out of 20 and 2,48 on management out of 10. It managed 4,11 in employment equity from a possible 15 points, 15 in enterprise development, six points in skills development and 10 in procurement.
