rumours on major company restructure?, page-5

Foreigners chasing local bargains - The Australian

Cashed-up South African property groups are poised to pour more money into Australia's crippled listed real estate sector. South African interests have already invested more than $400 mm in two trusts, joining institutions from Asia and Europe, particularly German pension funds, circling the local commercial property market. In the past 12 months, Singapore's GIC has invested in the GPT Group, while German investors have bought office blocks in capital cities. This week, South Africa's largest property trust, Growthpoint Properties, became the second South African company to invest in Australia, agreeing to inject $200 mm into the Melbourne-based Orchard Industrial Fund. Chief executive Norbert Sasse said he planned to use Orchard as a platform to rapidly increase Growthpoint's presence in Australia. ``Right now our focus is on Australia,'' Mr Sasse said. ``Many South African property funds are looking offshore, including in Australia. ``The dynamics in South Africa are different to elsewhere. We still have reasonable access to capital,'' he said, explaining that South African companies were not being as badly affected by the global liquidity crisis. ``Our asset valuations are conservative and our gearing ratios are low. Our valuations did not reach the dizzy heights of the other countries.''. Another investor, the Kirsh Group, headed by South African financier Nathan Kirsh, now owns 27.4 per cent of Abacus Property Group. Industry sources said yesterday that other South African groups were looking at Australia, including one said to be scrutinising Valad Property Group. ``We've seen a tremendous sell-off in listed property prices across the globe,'' Mr Sasse said. ``The US and UK markets are down by 40-50 per cent, but Australia is the market that has lost more than the other markets. ``We can't afford the big ones like Stockland and GPT so we focused on the small to medium sized trusts. We looked at every listed trust to have a good understanding of their business.'' After sifting through them, Growthpoint settled on Orchard because the bulk of its income is based on rental from assets located in Australia. ``Orchard leases its properties to strong Australian companies, like Woolworths,'' Mr Sasse said. ``It gives us a lot of certainties and predictable future cashflow.'' If Growthpoint succeeded in taking over Orchard it planned to use it as a platform to rapidly increase Growthpoint's presence in Australia, Mr Sasse said in Johannesburg. Mr Sasse came to Australia in April, attracted by the opportunities to purchase a listed property trust to turn it into a platform for the expansion of his Johannesburg company. ``We were successful in growing Growthpoint in South Africa from a company with 30 mm rand ($4.6 mm) market capitalisation eight years ago to a company with 22 bn market cap today,'' he said. ``That is highly ambitious, but we would like to think that maybe we can achieve something similar in Australia.'' Mr Sasse estimates that the recapitalised Orchard could have capacity of about $150 mm, and possibly $200 mm, to acquire commercial and retail properties