Growthpoint Properties Limited, the largest South African primary REIT listed on the JSE, has released its trading update for the nine months ending March 31, 2024.
Growthpoint said it has focused on two main strategies: optimising its South African portfolio and refining its international investments. The company invested R2.3 billion in its core portfolio and developed R1.6 billion worth of new high-quality assets, mainly logistics warehouses.
It also aims to dispose of R4 billion worth of assets over FY24 and FY25 while enhancing ESG initiatives.
South African Portfolio: The portfolio saw improvements with 878,107m² of space let, reducing vacancies from 9.7% at FY23 to 8.5%. Lease renewals increased, and rental growth rates improved. R1.7 billion was spent on developments, and R665.4 million worth of non-core properties were sold.
"We renewed leases of 547 521m², renewal rental growth rates improved from -12.9% at FY23 to -7.1% at HY24 and are currently -6.3%. Our lease renewal rate decreased from 79.0% at HY24 to 75.0% at the end of March 2024, compared to 64.9% at 30 June 2023," it said.
Rental escalations on renewals increased marginally from 6.8% at FY23 to 6.9% for the half year and the nine-month period. "Our total arrears remained well managed and are under control at R129.5 million," Growth point said.
Diesel costs decreased due to lower levels of load-shedding, and solar photovoltaic systems are being integrated with diesel generators, the group said.
Retail Sector: Retail vacancies decreased from 6.3% at FY23 to 4.8%. Trading density growth was 4.2%, driven by value apparel and food spending. Major developments include the Bayside Mall upgrade and new Checkers Fresh X and Shoprite stores.
For struggling retailer, Pick n Pay, Growthpoint said it is maintaining a good relationship with Pick n Pay and discussions are positive. "Excluding liquor and clothing stores, they currently occupy 9.4% of total retail gross lettable area at 108 364m² and are our fourth largest tenant by gross rental.
"They will be vacating Alberton Mall and Fourways Crossing and we have received offers for the space at both malls. We expect two Hyper stores, Northgate and Woodmead, to downsize gradually. We have no Boxer stores in our portfolio and are discussing expanding both Boxer and Pick n Pay Clothing."
Office Sector: Office vacancies improved from 19.2% at FY23 to 15.6%. Rent reversions improved, and the renewal success rate slightly decreased. Notable projects include the Hilton Canopy hotel and a green renovation at 36 Hans Strijdom.
Industrial Sector: Industrial vacancies increased to 4.8% due to new developments and tenant vacating. Positive rental growth was noted in the Western Cape, with several properties sold and awaiting transfer.
V&A Waterfront: Earnings increased by 11%, driven by higher tourism and new developments. Retail sales and visitor numbers grew significantly. Major projects include a new building for Investec Bank and the Timeout Market.
"Earnings before interest and tax increased by 11% on the comparative period supported by a 23% increase in international air passengers into Cape Town International Airport, local tourism, semigration, new developments completed during the period and continued high demand for office space.
"The growth was driven by the upward trajectory in retail sales and by extension retail turnover rental, whilst the hotels and Two Oceans Aquarium continued to benefit from improved local and foreign tourism," it said.
Retail sales and visitor numbers increased by 17% and 11% respectively, compared to the prior 9-month period. Precinct-wide, the V&A has negligible vacancies at 0.14%.
Hotels enjoyed consistent high demand, resulting in increased occupancies and revenue per room rates across the precinct. The marine and industrial sector enjoyed strong growth in mooring income including additional income due to diversions from the Suez Canal, Growthpoint said.
The V&A funds its development pipeline via a combination of shareholder and third-party funding. It has R2 billion of committed third party facilities, of which R1 billion was raised during the period and R1.75 billion is in the form of green loans. R850 million was undrawn at 31 March 2024.
New developments completed during the period include:
- Investec Bank moved into their new 10 500 m² building, enhancing the blue-chip tenancy at the V&A,
- The first Timeout Market on the African continent successfully opened in November 2023, contributing to the improved performance,
- The refurbished helistop facility which launched in November 2023, boosting leisure trading,
- Alfred square was completed, increasing public access, and
- The "CAPE TOWN" sign was launched in November 2023, as a new instagrammable landmark in Cape Town.
International Portfolio: Growthpoint focuses on optimizing international investments. Recent activities include receiving a non-binding indicative offer from Vukile Property Fund Limited for Capital & Regional plc.
Treasury and Capital Management: Growthpoint said it maintained excellent liquidity and access to funding.
The weighted average interest rate stayed at 9.6%, with 79.5% of interest on debt hedged for a weighted average term of 2.1 years. Two new bonds were issued, and significant international dividend hedging was implemented.
Growthpoint said its domestic portfolios showed improved performance despite the challenging South African economy. International investments are expected to perform in line with guidance, and the V&A Waterfront continues to exceed expectations due to increased tourism.
"Given the negative impact of high interest rates locally and internationally, which has been greater in the second half of FY24, we reaffirm our guidance of a 10% to 12% decline in Distributable Income per share (DIPS) for FY24," it said.
Shares in Growthpoint are up some 6% over the past year.
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