With assets at the close of the period exceeding R29.1 billion and a market capitalisation over R19 billion, the increase in Growthpoint’s linked unit price from R11,10 at June 2008 to R15,00 at 31 December 2008, together with the 56,3 cents distribution announced for the six months ended 31 December 2008, amounts to noteable return of 40.2% for the six month period.

This return is one of a number of Growthpoint’s remarkable achievements during the period.

In November 2008, Growthpoint become the only South African real estate company to be included in the MSCI (Morgan Stanley) Barra’s MSCI Emerging Markets stock index, and it made its landmark debut on the JSE/Actuaries All Share 40 Top Companies Index (ALSI 40 Index) on 22 December 2008, ranked 31 of the Top 40 companies. Furthermore, Growthpoint’s R1.74 billion capital raising rights issue announced on 5 December 2008, closed successfully and was oversubscribed at the end of January 2009.

Growthpoint CEO, Norbert Sasse, points to the company’s strong balance sheet, savings and efficiencies achieved as a result of internalising its management, good liquidity, long lease expiry profile and quality clients, as the factors which have underpinned Growthpoint’s distribution growth. He also points out that the growth in distributions is based on sustainable earnings derived from property net rental income and investment income.

However, Sasse notes that there are signs that the property market is heading for more subdued times than have been experienced over the last five years. “While building costs have peaked and are coming off, occupancy costs including rates and electricity are on the rise and not all are recoverable from occupants,” says Sasse. The expected decrease in short-term interest rates over the next 12 months is also expected to have a limited benefit to the property sector, as banks are taking higher margins.

Despite the poorer economic conditions and the fact that the property sector is coming off a high base of strong growth in the previous few years, Growthpoint is still confident of achieving growth in distributions for the full year to 30 June 2009 of between 7% and 10%, assuming no further change in market conditions or unforeseen major tenant failure.

“Growthpoint is well positioned for the current market challenges with excellent risk diversification both geographically and sectorally, a low gearing level of 36.3%, some 96.7% of its borrowings secured at fixed interest rates and the availability of significant unutilised debt facilities,” notes Sasse. Growthpoint is also experiencing an increased number of opportunities to acquire investment quality properties.

In addition to normal rental escalations during its interim period, Growthpoint’s increase in gross revenue of 18.6% and property expenses of 19.3% was largely due to acquisitions and new developments which contributed, net of disposals, an additional R116 million to property net income in the six month period.

Growthpoint’s occupancy levels closed the period at 96.5%, slightly off its level of 97.1% six months prior. Growthpoint’s industrial portfolio is showing vacancy levels below 3%, its retail properties are reflecting vacancies of 3% and its offices 5.3%. The majority of vacancies are attributable to new developments acquired, where Growthpoint undertook the letting risk.

Growthpoint acquired six properties during the period: three in the office sector for a total of R158,6 million at an average initial yield of 8.9%, and  three properties in the industrial sector for a total of R91,5 million at an average initial yield of 9.8%. It also purchased industrial land to the value of R10,8 million.

Enhancing its property portfolio, Growthpoint invested an additional R1,2 billion in the development and redevelopment of properties and has entered into agreements to acquire three industrial properties in Somerset West for a total cost of R77,1 million which are expected to transfer by April 2009 and once fully let, should return an initial yield of approximately 11.3% on cost. Three non-core properties were disposed of for R46 million and agreements for the sale of a further three properties, to the value of R177,5 million, have been entered into.

Growthpoint’s linked units continue to enjoy high levels of liquidity and tradability. During the six months ended 31 December 2008, approximately 360 million of Growthpoint linked units traded on the JSE Securities Exchange, representing 28.1% of units in issue.