Growthpoint Properties has reported solid operational results across its local and international investments for the six-month period ended 31 December 2023, highlighting a stellar performance from its V&A Waterfront portfolio, driven by the positive impact of increased tourism.
The group added that its South African portfolio is showing stable and steadily improving property metrics.
The robust operational performances from the underlying portfolios of Growthpoint’s various investments were, however, overshadowed by higher interest rates globally.
South Africa's largest primary REIT listed on the JSE reported total property assets down 1.1% during the period to R177.9 billion.
Performance
During the period 644 308m² of SA space was let and all key property metrics showed an improvement despite the challenging domestic economy
SA renewal success rate of expiring leases increased to 79.0% (HY23: 61.2%).
SA and Group vacancies improved to 9.2% (FY23: 9.7%) and 8.5% (HY23: 9.4%)
Total revenue increased by 4.0% to R7.1 billion.
Operating profit increased by 0.2% to R4.5 billion.
Basic headline earnings per share decreased by 34.2% to 56.59 cps (HY23: 85.99 cps).
Reflecting the impact of high interest rates, Growthpoint said it will distribute R2.0 billion, representing a half-year dividend per share (DPS) of 58.8cps, 8.6% down from HY23.
Norbert Sasse, Group CEO of Growthpoint Properties, said: “Despite unprecedented challenges in our markets, including low domestic growth, volatile global markets caused by interest rates that remain higher for longer and rising geopolitical tensions, our results continue to reflect the resilience and diversification of our business and our quality earnings.”
Growthpoint continued investing internationally with 43.5% of property assets by book value located offshore and 32.5% of DIPS earned offshore for HY24.
Growthpoint owns 57 office and industrial properties in Australia valued at R58.7 billion through a 63.7% shareholding in Growthpoint Properties Australia (GOZ) and six community shopping centres in the UK valued at R9.3 billion through a 68.1% investment in LSE- and JSE-listed Capital & Regional (C&R).
Through its 29.5% investment in LSE AIM-listed Globalworth Real Estate Investments (GWI),
Growthpoint owns an interest in 71 office and industrial properties with its effective share valued at R17 billion.
Domestically, Growthpoint owns and manages a diversified core portfolio of 352 retail, office, and industrial properties across SA.
The group's strongest and most active sector remained its industrial property portfolio. Like-for-like net property income (NPI) increased by 5.8%, driven by better sector dynamics, good letting, improved renewal rental growth, and significantly fewer bad debts.
All portfolio metrics were positive, with 44 of the 101 leases renewed at positive renewal growth rates averaging 3.0% in the period. The portfolio’s vacancy rate is impressively low, at just 3.0%.
In a welcome positive trend, Growthpoint’s office property portfolio vacancies reduced yet again, improving to 17.8% (FY23: 19.2%) from their 22.4% peak in March 2022.
Improvements were evident across nodes, but Sandton which represents 21.5% of Growthpoint’s office portfolio, showed a particularly significant change for the better
Growthpoint invested R1.0 billion in development and capital expenditure for its SA portfolio in HY24, with commitments of R1.6 billion at HY24.
“The improving metrics from our SA business are encouraging, led by the industrial and retail sectors. We will continue optimising this portfolio, including increasing our exposure to better-performing real estate sectors and regions and leading the transition to renewable energy in the same way that Growthpoint championed certified green building in SA. This business is underpinned by effective strategies delivered by a skilled team of people and partners,” said Sasse.
V&A retail sales increased by 18% in the period and trading densities increased by 21% on a rolling 12-month basis — more than double the MSCI super-regional shopping centre benchmark. Rentals also exceed this benchmark, and with a 0.4% vacancy, demand for prime space is buoyant.
The first TimeOut Market in Africa is trading exceptionally well after opening at the V&A in November 2023. This month also saw the refurbished helistop opening, with trading up 122% in November and 138% in December.
Demand for V&A offices is strong, with vacancies at a minuscule 0.1%, and an increase in staff returning to their offices is noticeable in the precinct, said Growthpoint. Investec Bank moved into its 10,500sqm new office in November 2023.
Ninety One has taken temporary offices at the V&A of 3,500sqm while Growthpoint completes the green redevelopment of its foreshore premises, it said.
The 7,000sqm office conversion in the Cape Town Cruise Terminal building is underway for completion in mid-2024. In the marine and industrial sector, the Cape Town Cruise Terminal is expecting to welcome 60 cruise ships during the current cruise season (October 2023 to May 2024).
Charter boat businesses increased by 22% during the period, casual berthing remained robust, and the marina was fully occupied in November and December 2023.
Given the impact of high interest rates across our local and international businesses, which will be greater in the second half of FY24, Growthpoint expects DIPS to decline by 10% to 12% for FY24.
This is an improvement on the original guidance, which was for DIPS to decline 10% to 15% for FY24.
Shares in the group are down around 10.5% over the past year.
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