Tech constructs of the SA REIT landscape

A look into who is faking #IT and making #IT in this new tech age

Part 3 of 5: Growthpoint Properties

Welcome to the third article in our series on the keywords SA REITs should consider more often in this day and age. This month we look at the beast that is Growthpoint, and the company’s attitudes towards innovation and tech, just as we previously did with Accelerate Property Fund and Emira.

(If you don’t know what we’re talking about, have a look at the rundown below of what we’re doing. If you already know what we’re up to, skip to the section labelled ‘Why is Growthpoint a beast?’)

A brief rundown of what we are trying to achieve:

Every year South African listed property entities release their IARs and parade them around for all to see. Sure, this is done because it’s mandatory, but it is also done as a means of being accountable to shareholders for results the companies have achieved over the past year. IARs provide insights for the investment community and public at large to make decisions on whether they should buy, hold or sell a particular share. There is a plethora of data, both quantitative and qualitative, that can be investigated.

This is where yours truly comes in and says – let’s look at these reports with a proptech lens to make sense of SA REITs’ attitudes towards tech, innovation and the future through analysing a few key words. These are:

• Proptech;
• Technology (and its derivatives such as technological etc.);
• Innovation (and its derivatives such as innovate, innovative etc.); and
• Social media

The last two articles looked at Accelerate Property Fund and Emira Property Fund, two companies that have clearly different attitudes towards technology and its ability to disrupt. The proptech differences between these 2 entities were, briefly:

• Neither entity mentioned proptech once in their IARs. No surprises here.
• Emira has already undergone a change in its approach to technology and disruption, whereas Accelerate’s beliefs in disruption are there, but their attitude towards it impacting its operations are lacking.
• A mix of skills at executive level drive tech in Emira.

Why is Growthpoint a beast?

Growthpoint is the largest South African listed property company and owns a property portfolio of 506 directly owned properties in South Africa. Growthpoint have an interest in 58 properties in Australia, 62 properties in Central and Eastern Europe and seven community shopping centres in the UK.

What is the beast’s attitude towards tech and innovation and proptech?

It’s always interesting to see how the big guys move towards innovation and technology, and the potential they have to pull the market with them. Is it an approach of “button down the hatches” or “adapt or die”?

Our focus on Growthpoint will be slightly harsher based on the importance of its position in the marketplace.

Growthpoint Properties:

Proptech – occurred 0 times:

• The word ‘proptech’ was not mentioned in the Growthpoint’s IARs. As noted above, with Accelerate and Emira, this doesn’t come as a shock.
• It’s clear, at least to us, that the SA REIT world does not have a view on proptech, given its 0 out 3 score thus far. Seems like marketing campaigns are not seeing value in connecting the term with the actions taken. Or is this a secret?

Technology et al – occurred 22 times:

• Growthpoint (like Accelerate) identifies ‘technological innovation’ as a market disruptor in achieving better distributable income. It sees this risk across all time horizons (immediate and long-term).
• Growthpoint states: “Through exploring the ways people have embraced technology, and how the world has digitised, we identified new avenues and opportunities for the Growthpoint brand and see scope for more growth, change and innovation in our communication.” All very well said, but how do they take this statement forward?
• Similarly, “as an innovative business, we keep an eye out for new trends, ideas and applications which can benefit Growthpoint. These include growing our renewable solar energy footprint and applying new technologies that support the efficient functioning of our properties.” Here the use of technology, like other funds in the series of articles, speaks to greening the portfolio. Growthpoint, it can be said, have been pioneers in this space as they were the first to issue green bonds as part of funding for greening their portfolio. So… 10 points for Gryffindor!
• Likewise, Growthpoint states: “..new technology continues to change the built environment.” It drives not only efficiency within the built environment but also, communication between stakeholders (employees and tenants alike) – something that, according to Growthpoint, has been a success over the past year.
• Technological interventions – as labelled in their IAR – are reviewed on an annual basis.
• Growthpoint’s subsidiary, Globalworth,  “recognises that technology is a major disruptor for the real estate industry globally and aspires to be the most technologically advanced landlord in the CEE office market. It takes a holistic approach to the use of technology to add value to its portfolio and to create a strong community with the users of its buildings.”

• Our commentary:

All good statements, and don’t get us wrong: they have been successful in achieving greening through technology, but it feels like they could embrace other themes in proptech to help their operations.

What do we mean?

Take Emira for example. They have a very different (we would also say successful) way of “selling” their space to the market. Have you been on Growthpoint’s app? It’s not the best [see previous article on its rating and others: https://proptechtalk.com/2020/10/13/asset-magazine-4-whats-app-with-that/]… and given that Growthpoint is the beast that it is, shouldn’t they really focus their attention on smarter ways to market space? Come on Growthpoint! You can do tech better!

Growthpoint seems to be predominantly playing in the smart building segment of the proptech economy, whereas Emira is predominantly in the transactional space (albeit their greening process is also up and running). Whilst the statements are a definite sign of intent to implement a proptech strategy, our criticism is aimed at the mismatch between strategy and the disruptive nature alluded to by Growthpoint. Are these green initiatives enough to tackle market disruptors to become the “most technologically advanced landlord”? Are they more of an improvement of an existing model, or a genuine attempt to disrupt the market?

Innovation etc. – occurred 18 times:

The more prevalent occurrences of the word ‘innovation’ and its adjectives read as follows:

• “We create value for all our stakeholders through innovative and sustainable property solutions.”
  • “The future of offices has become a key topic of debate. We disagree with those who believe they will become irrelevant. There is still demand and there are still deals to be done even in this market. We are receiving requests based on innovative thinking to accommodate social distancing requirements and flexibility, and we are challenging ourselves to find new and creative approaches to meet client needs.”
  • “Offices facilitate corporate culture, collaboration, problem solving, creativity and innovation like no other business tool can.”

• Innovation, according to Growthpoint, is focused more on greening properties rather than say digitising its business. This makes sense as they are pioneers when it comes to operating in the greening space.
• They have already introduced innovative ways of operating and leasing. SmartMove is a strategy introduced by the company five years ago that offers prospective tenants up to 125% of rental allowances back provided said tenants lease property from Growthpoint. Benefits include free rental periods, zero escalation for your lease period and contributions to your office fit-out and relocation costs. They have also introduced initiatives such as SmartFlex, UNdeposit and Green Lease Addendum, which are all in place to entice new tenants to their buildings through flexibility in such tight times.
• These are great initiatives. However, we would LOVE to see better ways of decreasing vacancy rates in their portfolio (Note: We are not saying they don’t. All we are asking is: is the way they operate to get vacancies down the best way? Do the platforms that they run provide data (real-time or otherwise) that helps them make operating decisions?

Social media – occurred 2 times:

• The more prevalent occurrences of the words ‘social media’:
  • “Growthpoint … ensured a steady stream of information and content was made available to the public via our social media channels and press releases.”
  • “Digital communication remains an essential pillar of our overall strategy. Our social media following continues to increase, with a steady rise in engagements and positive interactions.”
• It’s clear from the comments they do indeed take social media seriously. Perhaps it’s a strategy to add value to their brand. Their Facebook page = 3,600 followers, Instagram = 2,930 followers, Twitter = 6,457 followers.  Their portfolio is so large that it’s almost a necessity to utilise these platforms to promote the company and its route to market.
• It would be nice to see how the social media campaigns contribute to growth in the commercial property space.

Conclusions:

• The beast that is Growthpoint is doing well in certain spheres. However, we believe they could do much better when it comes to adapting more Proptech technology, or business models that help them market and sell their product – which is space.
• There is also the shared economy space that is slightly alluded to by their statement about adapting the office space, but there is no substance behind this i.e. no description as to ‘how’. We are yet to see (from our limited investigation admittedly) a company that has truly adopted a holistic shared economic view on development.
• More importantly we are yet to see the South African angle on the shared economic space that deals with the blaringly obvious challenges that we face as a nation: our need for jobs, development and housing.
• Given the beast that Growthpoint is, it’s important to highlight initiatives that help sell your product as best you can, right? From an outsider’s perspective when reading the IARs, they do not have it as a priority and seem to be operating the old-school way of doing property.
• Surely it’s time to open the floodgates and have real-time data on properties, so that leasing teams can best market space with as much data at their fingertips as possible? They need to make informed and intelligent decisions about leasing their space… and they sure have a lot of it! (Did we mention how we consider Growthpoint to be a beast?)
• Additionally, unlike Emira, and like Accelerate, it seems Growthpoint don’t have execs with IT experience. Now that could be because they have a lot of staff to service their many properties. Good for you Growthpoint, but tech initiatives? Who drives those? Surely someone from the top that understands tech needs to run with such initiatives? Perhaps they have outsourced this function and used a separate business model as opposed to an in-house business unit.
• Growthpoint are doing well in the greening aspect of things, but there is room for more development from such a big player. What’s next Growthpoint?

Next month we look to see if Redefine is living up to its name in this sector of sectors. Until then, keep safe.

Thank you and see you next time!