Growthpoint to Sell Shares to Fund Future Property Purchases

Growthpoint Properties Australia, controlled by South Africa’s largest real estate company, plans to sell shares to fund expected acquisitions this year as it seeks alternatives to bank debt.

Raising capital through equity will reduce the listed real estate investment trust’s gearing, the ratio of debt to assets, to as low as 40 percent from 46.9 percent currently, Chief Executive Officer Tim Collyer said by telephone yesterday. A lower debt ratio would allow it to seek an investment-grade credit rating of BBB- or above and lengthen its debt-to-maturity duration to as much as 10 years, he said.

Growthpoint, 63 percent owned by Johannesburg-based Growthpoint Properties Ltd. and formed from Orchard Industrial Property Fund in August 2009, has expanded its market value three-fold to A$959 million ($888 million) and doubled assets to A$1.7 billion since June 2010. The company last month extended its average debt maturity to 4.3 years from 2.6 years through a new pact with lenders.

“We hope to do more transactions this year,” Collyer said from Melbourne. “We certainly have people interested in investing but we have to go out and raise the capital.”

Growthpoint plans to raise equity from external investors, ultimately reducing the South African parent’s holding to as low as 50.1 percent, Collyer said.

Other REITs, including Stockland and Mirvac Group, which raised A$400 million each, and Cromwell Property Group, which drew A$250 million have also sought capital this year.

Growthpoint’s shares have risen 8.6 percent this year, compared with a 4.9 percent increase in the S&P/ASX 200 A-REIT index.

Industrial Properties

The company is focused on adding to its industrial properties following the acquisition in December of three warehouses in western Sydney for A$104.7 million from logistics company Linfox Group, which will develop and lease them. The property trust expects to increase the weighting of industrial assets to about 56 percent of its properties within 18 months from about 52 percent now, Collyer said.

Growthpoint is reviewing industrial assets held by Australand Property Group’s unlisted fund, he said. Investors in Australand’s wholesale industrial fund in June rejected a proposal to wind up the fund, and approved a plan for the company to continue operating the fund while considering other exit strategies including a sale of the properties.

“That’s just one of a number of investments that we’ll review,” he said. “We hope to do more transactions this year. It’s dependent on us finding the right opportunities and agreeing a good price with the vendor.”

Growthpoint joins Australian REITs including Stockland, GPT Group and Charter Hall Group in seeking more industrial properties, primarily modern facilities in locations close to transport networks. The rising demand amid tight supply of prime properties will see yields for these assets drop to as low as 7 percent by the end of 2013, from about 7.5 percent now, Collyer said.