Growthpoint secures R4.3bn in oversubscribed placement

Blue-chip South African real estate investment trust (Reit) Growthpoint Properties announced a R4 billion capital raise on the JSE after the market closed on Wednesday, but on Thursday morning confirmed in a media statement that it had in fact raised R4.3 billion in an oversubscribed placement.

The group noted in its Wednesday JSE Sens announcement that the cash placing is linked to “authorised but unissued ordinary shares in the company, which would go to qualifying institutional investors”.

This represents approximately 10% of Growthpoint’s existing issued ordinary share capital.

The country’s largest listed Reit noted in its Thursday statement that it had “successfully closed” the sizeable R4.3 billion equity raise, adding that the placement was 2.74 times oversubscribed.

“The company initially sought to raise R4 billion which it increased in response to the strong demand for new Growthpoint shares.”

Commenting on the move, Growthpoint Group CEO Norbert Sasse said the company was “extremely pleased” with the success of the accelerated bookbuild, which “enjoyed robust demand particularly from offshore”.

He noted: “Local support totalled 57% of the capital raise, with the balance coming from noteworthy international interest. It is encouraging to receive strong support from so many local and global investment institutions.”

Some analysts such as Keith McLachlan have questioned the move.

Growthpoint’s equity issue will place c.10% of their shares but only shave off c.2% of their debt. Hence, it is quite obviously massively dilutive. Couple that with a collapse in their payout ratio (100% ~ at least 75%) & forward yield is looking rather rubbish.

— Keith McLachlan (@keithmclachlan) November 12, 2020

Growthpoint said that the capital raised in the bookbuild will go towards reducing leverage and to “maintain balance sheet strength” in support of operating flexibility and to undertake certain development and investment activities.

“This balance sheet strength will position the company well for growth opportunities that may arise in the future … Proceeds raised from the bookbuild will in part be used to repay the debt from Growthpoint’s subscription and partial cash offer for shares in Capital & Regional in December 2019,” it added.

“The capital raise is part of Growthpoint’s larger capital plan which includes cost and capital expenditure savings, partial retention of earnings through the Dividend Reinvestment Plan [DRIP] and dividend payout ratio of at least 75% of distributable income, which is compliant with SA Reit legislation,” the group noted.

It said the capital plan also includes a non-core asset disposal programme of between R1 billion and R1.5 billion in the current financial year.