Our funds management model

Our funds management model introduces three possible sources of income for Growthpoint – equity investment returns, asset management fees and property management fees.

Growthpoint aims to invest between 15% and 20% of the equity in each of the funds, on which it earns investment returns. The balance of the equity is raised from third-party investors and gearing of approximately 40% is introduced to each fund.

As a significant stakeholder in the management of each fund, Growthpoint also earns management fees on all assets. The fees are based on either gross or net asset value. In addition, and to the extent that it is appointed as property manager, Growthpoint earns property management fees.

Key considerations before establishing a specific fund are whether there is potential to scale the opportunity, the level of investor appetite and whether the funds' assets would differ from our core South African portfolio investments in the office, retail and industrial property sectors.

Each fund will remain unlisted until achieving R10bn in assets or within seven to 10 years after launching, when it may pursue a public listing.

Overview

The capital-light nature of our funds management platform makes it particularly attractive in the current environment. In a fortuitous and well-timed move in 2015, Growthpoint introduced new income streams to its business by managing funds in niche real estate investment areas that differ from the company's core business.

This model gives Growthpoint access to alternative investment opportunities and leverages its management strength in the unlisted and co-invested environment. Of course, these portfolios of niche assets need to be compelling investments that are scalable enough to attract institutional investor support.

Our intention is to build a R15bn funds management business by 2023 and we have already achieved much in this area over the past five years. This includes establishing two successful and growing alternative asset class funds – Lango Real Estate, the Africa Fund, which launched in March 2018 and Growthpoint Healthcare Property Holdings (GHPH) which launched in August 2018.

Growthpoint's funds management platform has gained strong momentum over the past two years, and despite the global challenges brought about by the Covid-19 pandemic, its assets under management have grown to circa R11.7bn.

Our funds are on track to meet our growth goals and we are also well into the process of launching another specialist fund focusing on purpose-built student accommodation. We will continue to explore further niche fund opportunities. Like GHPH and the proposed investment in student accommodation, several of these opportunities represent investments in social infrastructure, which will allow Growthpoint and its co-investors to make a greater social impact through real estate investment while at the same time achieving sustainable returns.

Our funds management strategy has therefore already added depth to the real estate market for the broader investment community. The undertaking has also allowed Growthpoint to further diversify its assets, drive social impact and create sustainable value for our stakeholders.

Performance

This strategic focus over the year earned Growthpoint asset management fees of R32.9m and distributions of R132.1m from GHPH. We also received maiden dividends of USD1.6m from Lango, which we elected to reinvest, and a R6.6m distribution from the Africa Fund's Management company.

Backed by a management team with entrepreneurial vision and skills, our endeavours to initiate and grow new funds are gaining momentum. We will continue to pursue innovative partnerships and ways of investing.

Prospects

Our funds management model is a core strategy and our co-investment and co-management model is effective, and particularly attractive, in the prevailing market.

Growthpoint remains committed to initiating other funds and we expect to launch our purpose-built student residential accommodation venture in FY22. Furthermore, we believe there are opportunities to be found in property classes such as education, ICT, alternative energy and retirement living. The launch of any new fund will be opportunity driven and aptly timed.