Future Property Focus

Growthpoint has secured a R3,3 billion acquisition and development pipeline in South Africa to drive its immediate growth. In the current market, we are seeing more value in growing through development than by acquiring properties, especially in the face of negative gearing for acquisitions. Our development pipeline and properties are designed to support our outperformance. Through developments we are able to tailor-make premises for our clients that also match our investment criteria and produce the quality of property we want for our portfolio. We use best practice standards and development guidelines. Growthpoint has excellent in-house development skills and partners with reputable industry leaders for its developments.

We also consider our environmental and social impacts when undertaking a development, and in many instances our investment goes beyond our buildings to creating infrastructure in the vicinity of our development. Our deep understanding of property and facilities management means that, before our buildings are built, we consider their efficient operation in the future, to the benefit of their occupants. Our aim is to create space to thrive. Our developments represent excellent business propositions for our clients and our company.

RETAIL PORTFOLIO

Redevelopments, extensions and refurbishments continue across Growthpoint’s retail portfolio. This enhances our existing tenant mix and is increasingly needed to defend our shopping centres against new, competing developments. While we have essentially completed the refurbishments of all our top 15 centres in both the Growthpoint, and the Acucap and Sycom portfolios, these projects render no immediate yield but ensure the sustainability of rentals and shopper support. Where refurbishments are combined with redevelopments and/or extensions, the yields on projects will be diluted. However, as a norm, redevelopments and extensions will only be undertaken if substantially pre-let and at acceptable yields. The following major projects are either in progress or will commence during FY16:

KEY WEST

November 2015 will see the completion of a three-year upgrade and refurbishment programme of the Key West Shopping centre. The capital investment of R389 million included adding some 650 structured paid parking bays, relocating Virgin Active to new 4 080m² premises, adding 2 500m² of new retail GLA and refurbishing interiors, common areas and facilities. The project is complete save for a new municipal sewer link, two external road intersection upgrades and a taxi holding area upgrade. Planning for the redevelopment of the old Virgin Active premises and the 1 500m² expansion of Woolworths is well advanced. This phase includes introducing 3 800m² of new retail space and the redevelopment of some 4 400m² of existing retail space. This will entail the relocation of the existing banks from the main fashion mall to a banking court. Estimated capital cost for this phase is R181 million at an anticipated first year return of 8.0%.

GREENACRES

The Greenacres refurbishment and expansion project is being undertaken over three phases. The first phase commenced in August 2014 and launched in May 2015. It included the relocation of the food court and several line shops. New stores including Fabiani, John Craig, Kauai and Edgars Active were introduced. In addition the southern parking was reconfigured, a link to Shoprite and The Bridge was constructed and a new feature entrance added. This phase is open and trading and, with the exception of 101m², is fully let. The second phase is currently under construction and the scope of the development includes enlarging several national tenants including Standard Bank, Truworths Man, Identity, YDE, Foschini and Jet. The mall will have
2 700m² of new space which will include Old Khaki, Pick n Pay Clothing, Checkers Liquor Store, Executive Specs and several fashion boutiques, services and accessory shops. Interiors will be refurbished and shop fronts raised to 3.6 metres. Both phases, at a total capital cost of R296 million, are expected to be completed at an anticipated yield of 7.5%. In addition, an opportunity exists to introduce a full Virgin Active gym of approximately 3 800m² into Greenacres as well as the expansion of a further 1 000m² of retail for fashion. This final phase is currently in the planning and viability stages. The redevelopment and extension of Greenacres helps to address the newly introduced competition from Bay West and is expected to reposition Greenacres in the greater Port Elizabeth market.

HILLCREST CORNER (50% OWNED)

Comprising two phases, this project commenced on 16 July 2015. Phase 1 should be complete by the end of 2015. This phase will primarily redevelop some of the national fashion stores, which were relocated to Watercrest Mall, as well as the construction of 215 additional parking bays which will greatly enhance the centre’s appeal from a convenience perspective. New tenants for the project, at a cost of R18,5 million (50% share), have been secured and include Baby City (1 167m²), Mr Price Weekend (581m²) and Standard Bank (580m²). The second phase of the development is the construction of a 3 616m² Virgin Active linked to Hillcrest Corner on an adjacent vacant site. We expect this phase to commence towards the end of 2015 for opening by November 2016. The total capital cost for the second phase is R41 million (50%) at an initial yield of 8.5%.

VAAL MALL (77.9% OWNED)

Started in September 2014, the project includes a new parking deck and added GLA of 15 000m². Edgars, Jet, Toys R Us, Foschini, Markham, Donna Claire, TotalSPORTS, @Home, Dis-Chem, Truworths and Identity will all expand. New tenants include Ster-Kinekor, Mr Price Sport and the Cotton On Group. Construction should be complete by July 2016, save for the expansion of Woolworths. In addition, the existing mall will be refurbished, introducing new floor tiles and energy efficient lighting. This R442 million project (100%) is anticipated to be completed at a yield of 8.0%.

PAARL MALL

Paarl Mall’s expansion commenced in January 2015 at an approved capital cost of R54 million at an initial yield of 8.5%. The project includes a
1 985m² Woolworths expansion and the relocation of a number of tenants. The project is proceeding as planned, on budget and within time. A further phase, introducing Game as a trading anchor to the mall, is being planned.

BROOKLYN MALL AND DESIGN SQUARE (75% OWNED)

The next phase of Brooklyn Mall’s redevelopment is subject to the finalisation of a town planning application, a process which has been on-going for almost eight years. Notwithstanding the unacceptable delay, the major international fashion retailer earmarked for this extension, occupying 2 200m², remains committed to the development. We expect that the project will commence during FY16 for completion in 2017. We are also conducting a feasibility study on the redevelopment and extension of the existing office block at the shopping centre, which would enable the office component to compete in the A-grade office market of Brooklyn. Further, we expect to commence with the redevelopment of the current Checkers space in 2016. Checkers will relocate to a state-of-the-art store in the current Game premises and its existing store will be redeveloped into smaller fashion retail premises.

WATERFALL MALL

The 7 000m² extension to Waterfall Mall, Rustenburg, has now been approved by the local authority after a long period of protracted negotiations. Renewed interest from national retailers for additional brands and the extension of existing retail offerings is the main driver of the project. New proposed tenants include Dis-Chem as an anchor, and ancillary fashion, household and service-related tenants. The tenant mix will consolidate all the retail offerings in Rustenburg and ensure Waterfall Mall remains the dominant retail centre in the region of the North West province. Construction of the development, if pre-let at 65%, should commence in early 2016 and will include 442 additional parking bays in a larger parkade. The preliminary project cost is R216 million, with an anticipated yield of 9.5%.

RIVER SQUARE SHOPPING CENTRE

The objective of the re-development is to reposition the centre by enlarging, refurbishing and re-tenanting it. New proposed tenants include Cape Union Mart, Old Khaki, Cotton On, Pizza Hut and RocoMamas. Existing tenants that require additional space include Truworths, Identity, Mr Price, Milady’s, Ackermans and Woolworths. The R66 million project is expected to yield 9.2%.

OFFICE PORTFOLIO

The following office developments are currently underway:

DISCOVERY

We have commenced with the construction of the new Discovery head office on the prime corner of Katherine Street and Rivonia Road, Sandton. The property is co-owned by Growthpoint (55%) and Zenprop (45%) and the development is being undertaken as a joint venture. This 5-Star Green Star SA rated building will comprise 89 600m² of offices with 5 753 basement parking bays, and will be completed in December 2017. This landmark development is made up of two atrium office towers linked with a central concourse, featuring an activated roof with sports facilities. The development is future proofed for seamless expansion of up to 135 000m². The Discovery lease will commence on 1 January 2018.

BRIDGE PARK

Bridge Park is an 18 000m² office development in the Bridgeways Precinct of Century City, undertaken as a joint venture between Growthpoint and Rabie Property Group. It is located on Ratanga Drive and falls within an all-green precinct which includes the R1,0 billion Century City Square development comprising a 900-seat conference centre and 125-room hotel. This all forms part of the Green Star SA – Custom Mixed Use rating pilot programme of the GBCSA. Bridge Park consists of two four storey buildings – the 9 900m² Bridge Park East and the 8 100m² Bridge Park West – which have a shared basement and atrium. The development commenced in March 2014 for completion in July 2015 at a development cost of R450 million.

RIDGEVIEW

This 4-Star Green Star SA rated premier office building in Ridgeside, Umhlanga Rocks is a R157 million development. It includes 6 680m² of GLA across four super-basement levels and four above ground office levels. Aecom will occupy 3 368m², or half the building, on the top two floors. It is set for practical completion by mid-December 2015.

THE BOULEVARD

Extending Growthpoint’s strong presence in the Umhlanga New Town Centre, The Boulevard is being developed adjacent to the existing owned buildings known as ‘Lincoln on the Lake’ and ‘Mayfair on the Lake’. The first phase of this development will include 5 441m² of GLA with a potential bulk of
9 756m² for the entire development. Designed for a 4-Star Green Star SA rating, the first phase of the development is set for practical completion in May 2016. RHDVH will occupy nearly half of the building. The total development cost is R117 million.

ANSLOW PHASE 2

This 9 500m² office development enjoys a prime position at the William Nicol Drive and Main Road crossing in Bryanston, in Sandton. With superb visibility, it maximises office exposure onto both William Nicol Drive and Main Road. The two-level office building is situated on a two-level structured parking platform, offering generous parking with direct building access. It features three internal atrium areas and balconies of around 800m². It is designed as a 4-Star Green Star SA rated development and is due for practical completion by the end of May 2016. It is already 50% let.

LAND — TYGER VALLEY

In line with our Office sector development strategy, we acquired land for development at a cost of R56 million in Tyger Valley, Cape Town.

INDUSTRIAL PORTFOLIO

Growthpoint’s Industrial team has a strategic imperative to extract value from its existing asset base due to the scarce and relatively expensive acquisition opportunities in the sector. Last year we announced our ‘convert the dirt’ strategy for our industrial portfolio, and it has already gained momentum with several developments and redevelopments having been completed or underway. Our core focus remains on existing land holdings and value-extraction opportunities within our portfolio. We are noticing a continued emergence of new industrial nodes. Land costs continue to increase in KwaZulu-Natal and Cape Town due to scarcity, yet Gauteng land prices seem to have levelled out. Land preparation for development is well underway specifically at Samrand, Wadeville and Monte Carlo. Our minority exposure to Montague Park on N1 Business Park via the Acucap acquisition is developing well. Significant developments and redevelopments underway include:

MONTE CARLO

This industrial development is in the sought-after industrial node of Westmead, Pinetown. The development totals around 9 022m² of new A-grade warehouse space comprising two individual warehouses of 5 103m² and 3 919m². It features a dedicated concrete hardstand yard of 4 484m² providing ample access for the manoeuvrability of large vehicles. Each warehouse will have its own internal offices and ablution facilities with large canopies for all roller shutter doors. The development is currently under construction and is expected to be complete in November 2015. The approved development capital expenditure is R63 million with an initial yield of 8.3% once fully tenanted.

GREENFIELD INDUSTRIAL PARK

The R150 million development of Greenfield Industrial Park will introduce a quality, modern industrial estate on a prime 3.4 hectare site in Airport Industria, near Cape Town International Airport. Set for completion in November 2015, it is the landmark redevelopment of the former Wasteman site. The park is well situated in the high-demand Airport Industrial Node, on Manchester Road, adjacent to the Borcherds Quarry interchange and the Airport Approach Road. It is positioned for easy access with good proximity to the N2 highway, for both north-and south-bound routes. It also benefits from excellent visibility with prominent signage opportunities. Greenfield Industrial Park includes 21 000m² of flexible, sub-divisible space, intended to meet the needs of modern business. It features internal stacking heights of 12 metres, and fully finished office components. It is designed for efficiency, including optimal use of warehousing, yard area and roadways, with two entrances and exits, and generous parking facilities. It has been registered for the Green Star SA — Custom Industrial Rating Tool with the GBCSA. The building is targeting a 4-Star Green Star SA rating with its many integrated features to reduce utilities costs.

MAN DIESEL & TURBO

Growing our more than a decade-long relationship with this leading company, we are custom developing a 7 524m² warehouse for it, expanding its Henville, Germiston premises of approximately 5 000m². The R53 million project’s completion date is August 2015 at a 9.0% return. The building has a number of cranes, features a custom-built blade assembly facility, a workshop area with a sandblasting facility and spray booth. It also includes A-grade offices, a canteen, change rooms and covered parking. The property allows for circulation around the facility to accommodate trucks and various delivery vehicles. It features a flexible design with future expansion capability.

HILLTOP INDUSTRIAL PARK

The redevelopment of this 71 880m² property in Tunney, Ekurhuleni, is expected to be completed in December 2015 at a value of R75 million and a return of 9.4%. The project involves demolishing old structures to increase circulation and truck access, developing a new canteen, change room entrance and security guard facility. It is also being improved with new fire sprinkler tanks and reticulation to all facilities. We are refurbishing existing facilities to accommodate new tenant’s requirements, including the painting of building exteriors and a general upgrade of existing office buildings, ablutions and warehouse facilities.

WADEVILLE (70% OWNED)

With a potential development bulk of 70 000m², we are currently installing infrastructure for a new industrial park in Wadeville, Germiston. Our initial R40 million investment includes developing access roads and reticulation to various stands, electricity supply, storm water attenuation, an entrance gatehouse, security and access control, as well as fire sprinkler protection.

SAMRAND

This new development, just off the N1 highway and halfway between Pretoria and Johannesburg, represents 200 000m² of potential developable bulk with a potential value of R1,7 billion.

M1 PLACE

The redevelopment of this Kelvin property is valued at R90 million and represents an 11.2% return. Due for completion in August 2016, the 18 193m² property will cater for its tenants’ long-term expansion plans. It will be given a new common entrance and escalators, its warehouse will be extended for added storage and the building’s façade will be upgraded. It will also receive full back-up power and a new events area and retail outlet.

MIDRAND CENTRAL

We are busy with two developments which cover 6 800m² of high-tech, secure, access-controlled industrial space. Due for completion in October 2015, these developments will benefit from excellent visibility on the K101 and easy access from the N1 and Allandale Road. Midrand Central also has future development potential of 12 000m².