Growthpoint annual results
Michael Avery says that the reckoning in REITland is coming as Growthpoint’s loan to value rockets to 44% from 37%. The excessive focus on income without regard to the sustainability of that income or the risks taken to generate it is exactly what got the sector into trouble. It should always have been about the balance sheet – current year income after all (until recently) was less than 10% of the value of your investment! The whole sector is complicit. It is not just the management teams. Shareholders cannot now cry “pay back the money” when they hired and approved boards and incentive schemes that generated the result it sought to. Shareholders ought not to have paid management for distribution growth only, nor should they have appointed board members to companies that have no understanding of the fundamental property business and how it creates value. Shareholders are the owners of the assets, you either put in the cash when it’s required or you hand the keys over to the debt providers. The rules were known upfront. Nobody should be bailed out of their past poor decisions. Yes, COVID and associated lockdowns have resulted in unprecedented mayhem, but the sector pretended that there were no risks to the balance sheet structures they had embraced. This was obvious nonsense. Avery speaks to Growthpoint CEO Norbert Sasse about how he plans to fix things at the country’s largest REIT.