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Growthpoint share price: Where next following portfolio revaluation?

‘The preliminary results of Growthpoint's external valuations indicate the largest six-month increase on a like-for-like basis in the Group's history.’

ASX-listed REIT, Growthpoint Properties (ticker: GOZ) on Monday announced that its industrial and office property portfolio had increased firmly in value since December 31, 2020. This follows a independent revaluation recently sought by the company.

Summarising these developments, Growthpoint’s Managing Director, Timothy Collyer, said:

'The preliminary results of Growthpoint's external valuations indicate the largest six-month increase on a like-for-like basis in the Group's history.

These gains were primarily driven by renewed investor demand following the coronavirus pandemic, which saw investors retreat from almost every asset class, including property.

'The significant uplift reflects the substantial re-rating that has occurred across the industrial sector, driven by continued strong domestic and offshore investors' demand for industrial assets, as well as leasing success across both our office and industrial portfolios’ – Mr Collyer added.

In response to this news, the Growthpoint share price opened firmly higher, at $4.10 per share, before falling ~3% within the first half-hour of trade. Even after that dip, the stock remains up about 20% for the year.

By the afternoon session GOZ traded at $3.95 per share.

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Valuation, valuation, valuation

An asset is only as valuable as what someone is willing to pay for it. In the world of property, valuation can be a murky business. Indeed, long have many skeptics labelled Australia’s property market a dangerous bubble, arguing that valuations have stretched well beyond anything reasonable.

Despite that, property prices in Australia haven’t crashed, nor does such an occurrence look likely. Rather, they have continued to run higher, posting consistent gains out of the pandemic. In May, Sydney dwelling values increased 2.97%, Melbourne values gained 1.75%, and the 5-city capital aggregate increased 2.29% – according to CoreLogic.

What Growthpoint’s market release showed us is that the growth experienced in Australia’s residential property market is also present in the industrial and office spaces.

Looking at the specifics, Growthpoint said it had hired an independent expert to re-value a significant portion – some 77% – of the company's property portfolio, across both its industrial and office property holdings.

Overall, Growthpoint told the market that, on a like-for-like basis, its property portfolio had increased 7.7% or by $251 million, from 31 December 2020.

Looking first at the company’s industrial property portfolio, draft valuations have seen the value of the industrial portfolio increase 10.9% or $146 million, since December 31 2020.

Off the back of that revaluation, Growthpoint’s total industrial portfolio is now valued at $1.5 billion.

While Growthpoint’s entire industrial portfolio was revalued, only part – 14 out of 24 of its office portfolio assets – were revalued. As a result, the office portfolio has been upwardly revised by 5.4% or $105 million.

Investors should be aware, management noted that 'the valuations are subject to finalisation and audit and could be revised up or down.'

Tangible consequences

With this positive revision the company said it expected to see its net tangible assets increase by around $0.33 on a per security basis. For reference, at the close of the December half net tangibles per securities stood at $3.82 per share.

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