Growthpoint expects unusually high rental arrears from tenants due to lockdown
CAPE TOWN – Growthpoint Properties, South Africa’s biggest real estate investment trust, said it expected to end its 2020 financial year with unusually high arrears from tenants not having paid rent during the lockdown and the impact of relief offered to tenants through rent reductions and deferments.
The group, with properties in South Africa, Eastern Europe, Australia and in the UK, and which owns 50 percent of the V&A Waterfront, said in a nine-month update to March 3 that despite the economy, key performance indicators (KPIs) indicated that guidance provided to the market at its 2019 results was on track
At the end of 2019, Growthpoint forecasted nominal dividend growth for 2020. However, the situation around Covid-19 remained fluid, and it was difficult to quantify or assess the full impact of the economic situation on its customers at this stage. The board was deliberating all options including a reduced payout ratio.
“Although we don’t expect to start 2021 at pre-Covid-19 levels, early indications reveal that the worst is behind us,” the group said.
The retail portfolio was the worst-affected by the pandemic.
Rental relief issues for April and May were still being dealt with, but the group had settled with most of the big five national retailers.
“Fast food and restaurant tenants were showing the most strain pre-Covid, which will now be exacerbated. Many other trading categories’ arrears are expected to close at levels higher than we’ve ever seen before.” the group said.
Foot counts at its malls were “decimated” in April but improved from early May when many of the retailers were able to open. Since then, footfall numbers had bounced around and remained negative across the portfolio.
The only increase in footfalls was on the day that child grants were collected, and only a handful of centres experienced this increase. June foot counts also improved and were at 80 percent of June 2019 levels.
A number of businesses still needed to reopen in South Africa, such as restaurants and personal care retailers. The reopening of gyms was expected to be slow - Growthpoint has six gyms in its retail portfolio and “failures in these categories are unavoidable.”
There was still much anxiety about the spread of the coronavirus from retailers and shoppers and it was going to take a long time for historic shopping patterns to resume, the group said.
We expect to end the year with unusually high arrears levels due to tenants not having paid their rent during the lockdown period and the impact of the process whereby we are offering relief to our tenants through rent reductions and deferments.