Growthpoint’s properties trading well but high interest rates lower profit

Growthpoint says it saw a very strong performance in 50%-held V&A Waterfront. Picture: Mxolisi Madela

Growthpoint says it saw a very strong performance in 50%-held V&A Waterfront. Picture: Mxolisi Madela

Published Mar 14, 2024


GROWTHPOINT Properties’ dividend fell 8.6% to 58.8 cents a share in the six months to December 31 after higher interest rates impacted property values, equity and debt markets, and capitalisation and discount rates of investments, CEO Norbet Sasse said yesterday.

The financial results masked robust operational results across the local and international investments, and a very strong performance 50%-held V&A Waterfront. The South African portfolio also showed stable and steadily improving property metrics.

However, Growthpoint’s total property asset value fell 1.1% during the period to R177.9 billion.

He said the impact of high interest rates would be greater in the second half, and distributable income per share was expected to grow by between 10% and 12% for the full year, an improvement from the directors’ previous guidance of 10% to 15%.

Growthpoint expected distributable income per share (DIPS) to decline by 10% to 12% for the 2024 financial year.

“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,” said Sasse.

Group SA REIT’s loan-to-value (LTV) ratio was 42%, up from 40.1%, With good access to funding, it secured several longer-dated bonds through private placements with the International Finance Corporation (IFC) and other debt investors at attractive margins during the period. Liquidity was good with R1bn cash and R6.2bn in SA unutilised debt facilities.

Strategy remained focused on preserving liquidity and balance sheet strength in the long term, said Sasse.

International investment continued, with 43.5% of property assets by book value located offshore and 32.5% of distribution income per share earned offshore during the interim period,

Growthpoint owns 57 office and industrial properties in Australia valued at R58.7bn through a 63.7% shareholding in Growthpoint Properties Australia (GOZ) and six community shopping centres in the UK valued at R9.3bn through a 68.1% investment in LSE- and JSE-listed Capital & Regional (C&R).

Through a 29.5% investment in LSE AIM-listed Globalworth Real Estate Investments (GWI), Growthpoint owns an interest in 71 office and industrial properties with its share valued at R17bn. Growthpoint reinvested the June 2023 dividends from C&R and GWI and invested in C&R’s open offer for the acquisition of Gyle Shopping Centre in Edinburgh.

At the V&A, retail sales increased 18% and trading densities increased by 21% on a rolling 12-month basis – more than double the MSCI super-regional shopping centre benchmark.

The V&A was boosted by a return of tourists to Cape Town after the pandemic and robust demand for offices and other facilities at the development.

Demand for prime space at the V&A was buoyant and vacancy was at only 0.4%. The first TimeOut Market in Africa was trading well after opening at the V&A in November 2023.

Even with the Cape Grace closed for conversion from May to December 2023 and both the City Lodge and One & Only hotels undergoing refurbishment, net property income from the V&A Waterfront hotels increased 45% in the first half over the first half of 2023.

Office vacancies at V&A were at a minuscule 0.1%. Investec Bank moved into its 10 500m² new office in November. Ninety One had taken temporary offices at the V&A, while Growthpoint completes the redevelopment of its foreshore premises.

The 7 000m² office conversion in the Cape Town Cruise Terminal building was scheduled for completion in mid-2024. In the marine and industrial sector, the Cape Town Cruise Terminal expected to welcome 60 cruise ships during the cruise season from October 2023 to May 2024.

Charter boat businesses increased by 22%, casual berthing remained robust, and the marina was fully occupied in November and December 2023.

Growthpoint directors said all GOZ’s portfolio metrics are good with 97.5% of the portfolio occupied. GWI reduced vacancies to 11.7% from 14.5%, after a good leasing and portfolio performance. GWI’s portfolio valuation, impacted by higher interest rates, reduced 5.2% . C&R’s community-focused, value-driven retail strategy produced healthy metrics and had more value-adding projects under way.

Domestically, Growthpoint’s 352 retail, office, and industrial properties were on a firmer footing with reduced vacancies, which had steadily improved from 10.1% at half year 2023, to 9.7% at the end of the year and was currently at 9.2%. SA property values increased 0.4% to R64.2bn, signifying greater stability.

Growthpoint’s industrial property portfolio like-for-like net property income (NPI) increased 5.8%, driven by better sector dynamics, good letting, improved renewal rental growth, and significantly fewer bad debts. The portfolio’s vacancy rate was low, at just 3%.