CAPE TOWN - Growthpoint Properties, South Africa’s biggest real estate investment trust (Reit), lifted its dividend only 0.2percent to 106cents in the six months to December, as weak property fundamentals and rising vacancies bit into the performance of its local assets.
Distributable income was up 2.2percent to R3.2billion for the period, mainly as a result of better international contributions. Almost all South African portfolio metrics weakened during the six months, with vacancies increasing to 7.4percent from 6.8percent.
Tenant retention was a priority. “We are driving this through various initiatives," directors said in the results yesterday.
Chief executive Norbert Sasse said it had been an “exceptionally tough six months”, but the group was pleased with its “strategic progress.”
In the six-month period, "the considerable gains from our internationalisation strategy were erased by the under-performance from our domestic property portfolio as a result of South Africa’s economic decline, with the V&A Waterfront being an exception. Even so, Growthpoint’s growing international footprint continues to ensure that it is defensive,” said Sasse.
Investor Dave Hazelwood tweeted yesterday, citing Growthpoint: “This morning's property company results make for grim reading Vacancies up sharply. Expect negative reversions on rentals going forward.”
Another tweeter, Chris Hatting, said: “The economic impact of Cape Town’s swanky V&A Waterfront is 'beyond excellent' The Waterfront is far outperforming the rest of the country's economy, lifting its owner Growthpoint’s results.”
Growthpoint’s consolidated loan-to-value ratio remained conservative at 38.2percent, even though it was slightly up from 36.4percent in 2019.
Dividend growth for the year to June 30 was expected to be nominal.
South African “property fundamentals are likely to deteriorate further, worsened by Eskom uncertainty and increased cost pressure on utilities and rates and taxes. We expect the South Africa property portfolio to continue to dilute growth,” said Sasse. The group holds 442 properties in South Africa valued at R79.2bn.
Group revenue increased by 1.5percent to R5.7bn. Operating profit fell by 0.4percent to R4.08bn, compared to the comparative period.
Net asset value per share was down by 2percent to 2518cents.
Growthpoint is included in the FTSE/JSE Top40 Index with a market capitalisation of R66.8bn at December 31. The value of its retail, office and industrial property portfolio is split between South Africa (64.8percent) and international (35.2percent) assets.
It holds 62.2percent of ASX-listed Growthpoint Properties Australia, which owns 58 properties in that country worth R42.5bn.
In the interim period, Growthpoint acquired 51.1percent of LSE-listed Reit, Capital & Regional, which owns seven retail properties in the UK valued at R14.8bn.
Growthpoint’s largest equity-accounted investments valued are a 50percent share of V&A Waterfront, 29.4percent of London Stock Exchange AIM-listed Globalworth Real Estate Investments and 19.8percent of Growthpoint Investec Africa Property Fund.