Growthpoint 2018 AGM
Growthpoint held it's AGM meeting this week and also announced the acquisition of 100 SkyRing Terrace and a capital raising process.
Annual General Meeting
Growpoint believe that the positive economic fundamentals (low inflation, low unemployment, good GDP growth), coupled with record low office vacancy in Sydney and Melbourne and increasing occupier demand in the industrial sector, leave them well positioned to take advantage of future rent growth in markets where they have significant investments.
In 2018, Funds from Operation, was 25.0 cents per security, significantly higher than Growthpoint’s initial guidance of 23.6cps provided at the beginning of the financial year. A distribution of 22.2 cents per security was paid to securityholders, 3.3% above the prior year.
Acquisitions totaled $205.4 million, including $836 Welling Street Perth, whilst a significant sale of the Woolworths Distribution Centre at Mulgrave, VIC for $90.75 million, achieved a price 38% above book value.
A fall in capitalisation rates and good leasing results over the year, provided for a 6.2% increase in property asset values, on a like for like basis, which assisted strong growth in Net Tangible Assets per security of 10.8%, to $3.19 per security.
Growthpoint’s capital management position is healthy, with gearing at the end of the financial year at 33.9%, just below the bottom end of the Group’s target range of 35% to 45%. Following the settlement of West Perth and the recently announced Newstead office acquisition, gearing will be between 37.6% and 38.8%. Average debt maturity was maintained at 5 years after $515m of debt was extended over the year.
Growthpoint Australia’s largest investor is Growthpoint Properties Limited of South Africa, or GRT, who first invested in the Group in August 2009. GRT holds 66% of the issued capital, valued at over $1.6 billion on today’s share price. GRT is a long-term investor and has provided considerable capital to assist the expansion of the Group. GRT has stated its intention to increase its investment outside South Africa and Growthpoint Australia remains a key platform for this internationalisation strategy.
This week Growthpoint announced the acquisition of 100 Skyring Terrace at Newstead (see link) for $250M which will be funded from debt and an equity raising of up to approximately $135m from existing Growthpoint investors.
The issue price of $3.46 per security is a 4.2% discount to the last traded Growthpoint share price and represents an attractive FY19 DPS yield of 6.7% for Securityholders who wish to take up their allocation in the rights offer.
The Acquisition and Rights Offer are expected to have the following financial impact :
Annualised FY19 Funds From Operations (FFO) accretion of 2.2%
Pro forma FY19 FFO guidance increased from at least 24.6 cents per Security to at least 24.8 cents per Security
FY19 distribution per security (DPS) guidance of 23.0 cents maintained , subject to market conditions
Pro forma net tangible assets (NTA) reduced from $3.19 to $3.18 per Security due to transaction costs
Pro forma gearing of 37.6% – 38.8%, below the midpoint of Growthpoint’s 35% - 45% target gearing range
The Group has been progressing a number of opportunities which will underpin future earnings and distribution growth. These include;
the 19,300sqm Botanica 3 office building in Richmond Vic
Unlocking value at two Woolworths Distributions Centres
M&A, Hold or Sale of the 18.9% interest in Industria REIT
Growthpoint’s FY2019 guidance is for FFO of “at least” 24.8 cents per security and a distribution of 23.0 cents per security, 3.6% higher than FY2018