ASX code: GOZ
Share price: $3.20
Industry: Real Estate
Forecast 12 month Distribution: 21.9c
Growthpoint Properties is an ASX-listed REIT with a slightly more aggressive debt profile than its peers, but with a lucrative distribution to compensate. Unlike some other real-estate names on the market, it is a pure-play property manager, which holds all of its properties on its balance sheet with no funds management business or property management contracts. The group has existed in its current structure since 2009, when the Orchard Industrial Property Fund was recapitalised and management was brought in-house by the South-African parent company, Growthpoint. The REIT has moved away from a singular focus on industrial properties to include quality office and retail assets on its balance sheet in recent years.
Today, Growthpoint has properties valued at over $3b in its portfolio, with approximately two-thirds of the valuation attributed to its office assets of 26 properties, and roughly one-third to its industrial assets of 31 properties. The bulk of the company’s property exposure is centred in Victoria, New South Wales and Queensland, accounting for over 80% of the group’s asset values, with Victoria generating the largest share of rental income. The remaining properties are located across South Australia, the ACT and Western Australia with a single asset in Tasmania. Growthpoint boasts an impressive tenant list, with two of its top three being government agencies, plus ASX 50 and large multinationals making up the balance of the top ten.
The most recent transaction that Growthpoint undertook was the sale of two Queensland properties for $117m, reducing the company’s gearing to 39% as well as reducing its exposure to the sunshine state. The gearing levels prior to the sale had been sitting in the upper echelons of management’s target range and were considered quite high when compared to Growthpoint’s peers. This sale brings gearing back to the lower half of management’s range and offers it some breathing room in terms of its ongoing interest payments.
Whilst trading at a significant premium to its NTA of $2.72, Growthpoint offers the income seeking investor with a slightly higher risk tolerance a lucrative 6.8% yield and potential for further property revaluations given its office exposure to supply constricted east-coast markets. Whilst this REIT has slightly higher gearing than others in the sector, we believe that at current prices the company would make an attractive addition for a small or moderate weight in an investor’s portfolio.
Originally published in The Australian on Tuesday 11 April 2017.