You can also listen to this podcast on iono.fm here.
This week’s podcast is a special one, as it marks the 50th episode of The Property Pod, and we’ve got a heavyweight guest on the show.
Other than the 50th episode milestone, the good news is that this Moneyweb podcast will be publishing weekly from April, on Tuesdays.
On our latest pod we have Norbert Sasse, Group CEO of Growthpoint Properties, the largest real estate investment trust (Reit) listed on the JSE. Sasse has been at the helm for over two decades and has probably seen a lot – all the ups and downs in the property industry over that time.
Growthpoint has grown significantly since being listed, even expanding beyond South Africa’s borders, having gone into Australia over a decade ago. In recent years, pre-Covid that is, it expanded into the UK and the CEE, or the Central and Eastern European property markets, as well as African markets outside South Africa – that is, through Lango Real Estate.
Highlights of his interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.
The Place, Growthpoint’s head office in Sandton Central, Johannesburg. Image: Supplied
The Place, Growthpoint’s head office in Sandton Central, Johannesburg. Image: Supplied
Highlights
Growthpoint has an international property portfolio of assets valued at almost R175 billion now. When did you join and what was its size at the start, or when it listed?
“Suren, it’s a pretty good question, and I think maybe when I eventually retire, I’ll make some work of trying to get to the bottom of what happened between 1987 – which is when the company was originally listed – and 1999 or the year 2000, which is more or less when I got involved.”
“When I did discover Growthpoint, I was working for Investec Bank in the corporate finance division. This was in the late nineties … It’s fair to say that the stock market had a number of crashes along the way, leading up to the 1999.”
“In the corporate finance world things were relatively quiet, so I was scratching around for things to do at Investec and stumbled across this entity known as Growthpoint Properties and discovered that it had listed in ’87.”
“I analysed it in detail and at that stage it had gross assets, owning nine property assets valued at R118 million. It had way too much debt on its balance sheet – in the order of R78 million-odd – and an NAV [net asset value] of just R47 million-odd.”
“I analysed it in detail and at that stage it had gross assets, owning nine property assets valued at R118 million. It had way too much debt on its balance sheet – in the order of R78 million-odd – and an NAV [net asset value] of just R47 million-odd.”
But it was trading at a massive discount. The market cap was only R30 million-odd, R27 million-odd at the time.
“I still have the original document where I put forward a number of proposals to the Growthpoint board at the time. In fact, two out of three recommendations were to liquidate the company, because it had too much debt and it wasn’t going to be able to pay the interest on the debt. You’ll recall that in the late nineties the interest rate spiked right up to 24%-odd.”
Did Growthpoint owe some of that money to Investec at the time? How was Investec involved?
“Yes, Investec was involved in multiple guises. In the first instance they owned the management company. Growthpoint at that time was externally managed. It had an external manco, which was owned and controlled by Investec.”
“Investec had provided some of the debt, but Investec also owned about 30%-odd of the shares in Growthpoint at the time – as I said, the listed entity. So Investec was pretty much all over it. The reality is that on deep analysis I recommended that we consider liquidating the company, selling the assets, and returning money to shareholders.”
“The third alternative that I put forward was the option to pursue a growth strategy. In that regard one of the guys at Investec Property Group at the time, Sam Leon, had a relationship with the mines pension funds, and they needed a solution to their property portfolio.”
“The third alternative that I put forward was the option to pursue a growth strategy. In that regard one of the guys at Investec Property Group at the time, Sam Leon, had a relationship with the mines pension funds, and they needed a solution to their property portfolio.”
“They [mines pension fund] were overweight property … The pension fund industry was changing from defined-benefit to defined-contribution, and pension funds couldn’t gear – or still can’t gear – against property.”
Transforming Growthpoint
“So we provided them with a solution, and executing on that transaction effectively transformed Growthpoint from a fledgling company with a market cap of R27 million to a market cap of just over R1 billion [around 1999].”
“At that time, I was approached by the principals at Investec Property Group to leave my career in corporate finance and make a career in property, and to come and run Growthpoint Properties as an externally managed fund effectively under the management control of Investec.”
“So yes, it dates back to, let’s call it 2000 or late 1999, early 2000, when I got involved.”
Over 20 years down the line, what would you say are some of your milestones since then? Growthpoint is now multiple times bigger, and it has grown beyond SA’s borders …
“Suren, yes, I would say certainly that very first transaction is probably where I learned most of what I know about property today. It’s fair to say that when I was working in corporate finance, I was involved in listing IT companies, in emerging construction companies, emerging healthcare companies, and listing a hospital group – a very, very varied exposure and experience, but nothing in the line of property.”
“To be fair, in those years property was a bit of a swearword. It wasn’t institutional. Property was owned by the life companies. Old Mutual, Liberty and Sanlam played in the property space.”
“To be fair, in those years property was a bit of a swearword. It wasn’t institutional. Property was owned by the life companies. Old Mutual, Liberty and Sanlam played in the property space.”
“There was no listed property sector to mention. There were probably two or three stocks. They were property unit trusts. And so that very first transaction, getting my hands dirty, kicking the tyres, understanding everything there is to understand about property letting and leasing, and the income and expenses, and pretty much what comprises the business model of property, stands out as one of the early key development areas for me.”
Acquisitive growth
“Post that I think [one] of the real big milestones was a merger between Growthpoint and Prime Grow back in 2003. In 2004, we did a transaction where we bought the Investec head office buildings in Sandton and Cape Town on the back of a 20-year sale and leaseback transaction.”
“Then 2007 is probably one of the next key milestones, which is when we internalised the management company of Growthpoint and effectively the Growthpoint board and Investec agreed that for the payment of R1.6 billion – which was paid in Growthpoint shares – Investec would relinquish the management rights that it had.”
“About 400 of us who were working for Investec but managing Growthpoint left Investec’s employ and became full-time employees of Growthpoint. That was obviously very, very transformational.”
“About 400 of us who were working for Investec but managing Growthpoint left Investec’s employ and became full-time employees of Growthpoint. That was obviously very, very transformational.”
“We became completely independent of Investec, and we effectively had autonomy over how we wanted to grow, run and manage Growthpoint. So that was a very big highlight.”
“In 2009 [there was] the Australian investment, the first offshore venture. It was a key moment in Growthpoint’s growth path.”
Read:
Growthpoint targets increasing its offshore exposure [Sept 2022]
Growthpoint Australia seals deals worth R2.4bn [Dec 2011]
Growthpoint makes offer to buy Rabinov [April 2011]
In 2013/14, we did pretty much the acquisition of the Tiber property portfolio.
Sorry – before that, actually in 2011, we bought the V&A Waterfront!
How could you leave that (V&A Waterfront) out? That’s your trophy asset.
“[Chuckling] Trophy asset – absolutely. I’m just trying to get the chronology right here. The Waterfront was a very big highlight in 2011. This was actually the second bite at the cherry …
“We had tried to buy the Waterfront in 2006 but weren’t successful. We weren’t the top bidder. So to have a second bite at the cherry, and to then be successful, obviously was a fantastic moment for me personally.”
“We had tried to buy the Waterfront in 2006 but weren’t successful. We weren’t the top bidder. So to have a second bite at the cherry, and to then be successful, obviously was a fantastic moment for me personally.”
And then in 2014 there was the Tiber deal, with a couple of other merger and acquisition deals in between. Then more recently Globalworth and Capital & Regional.
Listen/Read:
‘Best December ever’ for Mall of Africa, Sandton City and V&A Waterfront
Podcast: Shoppers back at mega malls big time
Cape Town’s V&A Waterfront plans ‘jewel in the crown’ development in post-Covid future
Growthpoint’s R2.9bn bid for the UK’s Capital & Regional
Growthpoint, PIC buy V&A Waterfront
“If I had to pick maybe three of those, I would highlight the internalisation transaction in 2007, where we became independent.”
“For me, that is when Growthpoint got its soul.”
“For me, that is when Growthpoint got its soul.”
“Until that time it was managed externally in terms of this contractual arrangement with Investec, but once we became internal and employees of Growthpoint, that is when the company got its soul. That was one of the big, big moments.
“Then I’d say in 2009 the Australian acquisition and in 2011 the V&A Waterfront transaction. Those would be my top three if I had [to choose].”
Cape Town’s V&A Waterfront, which is jointly owned by Growthpoint Properties and the Public Investment Corporation. Image: Supplied.
Cape Town’s V&A Waterfront, which is jointly owned by Growthpoint Properties and the Public Investment Corporation. Image: Supplied.
Were you disappointed at not getting some deals like the Fountainhead [Property] deal?
“In hindsight it’s one of those that we probably ended up being glad we didn’t get. We were very disappointed at the time, obviously, but as time went by and with the benefit of hindsight I think [we are] probably quite relieved that we weren’t successful in that particular transaction. But sure, at the time we weren’t very happy.”
Read: Redefine buys 18% stake in battle for Fountainhead [March 2013]
Last year you announced that you will be retiring at the end of 2024. Is that still the plan? Why are you retiring?
“That’s correct. We did announce the retirement. I do still intend to retire then. I’ll be 60 in November [2023], I’ll have just turned 60 in 2024; I was born in 1964. So I would also have had, I guess, an innings with Growthpoint of circa 24 years.”
“I feel that I really have dedicated my entire career, to be fair, to Growthpoint – my entire working life and a big part of my life. I really did. My wife always chastises me for knowing everything about Growthpoint but not knowing the first thing about my personal finances …
“I just think that it’s time for me to maybe get a slightly better balance in life, maybe pursue a couple of personal interests and generally I’d say maybe just slow down a little.”
“I just think that it’s time for me to maybe get a slightly better balance in life, maybe pursue a couple of personal interests and generally I’d say maybe just slow down a little.”
“Clearly, I would still want to be involved in business in one shape or another, but to be fair I have not given that a fortune of thought. It’s only recently that I have come to the decision to retire, and I would probably be giving more thought to that in the next couple of years that come.”
Since you’re talking on a personal note, tell us a little bit about yourself that maybe not everybody outside Growthpoint knows. Where did you grow up, and why did you become a CA?
“Look, I’m one of two children. I’ve got an older sister. My father, who’s 92 this year and still alive, is a German immigrant. He emigrated to South Africa in 1954 when he was 24 years old. He was fortunate enough, I guess, to be 15 when the Second World War in Germany ended, so he wasn’t involved, didn’t get drafted into any of the forces or anything. He was too young.”
“But he came to South Africa, met a South African lady and got married. They had two kids. My father was a tradesman and had the most incredible work ethic. I always admired that in him.”
“At a very early stage, in my early days at school, one of my interests was tennis, and I managed to do reasonably well.”
“At a very early stage, in my early days at school, one of my interests was tennis, and I managed to do reasonably well.”
“I had a couple of coaching sessions and my parents became friendly with a tennis coach. We were invited to their home one weekend, and they had this really magnificent, sprawling home in Walkerville in the southern suburbs of Johannesburg, with a tennis court and a pool and a sauna.”
“I thought to myself, wow, that is something that I would aspire to own one day myself. I did a bit of asking and found out that clearly the tennis coach wasn’t making this kind of money from coaching tennis, but he was a chartered accountant working for the Chamber of Mines at the time.”
“It was there and then that I decided that’s it, chartered accountant for me.”
“It was there and then that I decided that’s it, chartered accountant for me.”
“I never looked back. I knew all the way through school I was going to go to university and become a CA. It made things quite easy, I guess. Maybe my priorities were all wrong, because it was a bit materialistic, but nonetheless that’s how I ended up becoming a CA.”
“I grew up in the southern suburbs of Johannesburg, in Robertsham. In fact, my mother was Afrikaans; she passed on a couple of years back. I went to an Afrikaans primary school, Afrikaans high school, and I went to the former Rand Afrikaans University, today known as UJ, and eventually passed my CA qualification, went overseas for a couple of years and worked and lived in London.”
“I then joined Investec Corporate Finance in 1996, and was in corporate finance between ’96 and 2000. And then the move to – to property.”
Listen to more episodes of The Property Pod here.
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