Growthpoint Properties plans to spend R2.3 billion to optimise and enhance the value of its portfolio.
The group announced it would also dispose of R4bn of assets over the 2024 and 2025 financial years as part of strategy to simplify its business.
South Africa’s largest REIT, which also owns commercial property assets in the UK and Central and Eastern Europe, said in a nine month trading statement that some R1.6bn would be spent on new assets, particularly logistics warehouses for the industrial portfolio, while further environmental, social and governance (ESG) initiatives would be undertaken.
Some R1.7bn was spent on developments and capital expenditure in the nine months to March 31. Given the negative impact of high interest rates, the guidance of a 10% to 12% decline in distributable income per share was maintained for the financial year to end-June 2024.
Its international expansion strategy had also been refocused. UK-based NewRiver REIT was in talks to acquire Growthpoint’s 68.1% stake in UK shopping centre company Capital and Regional.
Initiatives to unlock value were also underway at Globalworth Real Estate Investments, which owns commercial property in central and eastern Europe and in which Growthpoint has a 29.4% stake.
Growthpoint was also seeking a long-term solution to the capital requirements of the V&A Waterfront, which is 50% owned, and which was predicted to show significant growth in the next 3 to 5 years, the group said.
In the South Africa portfolio, key performance indicators continued to improve. Overall vacancies improved to 9.2% for the half year, compared with 9.7% for the 2023 year, and was currently at 8.5%.
Annual lease escalation rates and lease lengths on renewals had improved. Core retail vacancies in South Africa remained low at 3.8%.
Capital and development expenditure was being funded from asset sales proceeds and cash retained, due to the 82.5% dividend payout ratio.
“Excluding the disposal of the Kent residential apartments in La Lucia, we sold and transferred 10 non-core properties for R665.4m, at a R2.6m loss to book value. Delays obtaining Competition Commission approval and rates clearance certificates as well as delays at the Deeds Office resulted in a lower value of disposals than anticipated,” the group said.
Sale agreements of R1.3bn had been signed, with a number of these expected to transfer before June 30, 2024, and a further R1.9bn approved for sale in the 2025 financial year.
“The quality of our portfolio improved with the disposals of City View and City Mall, and Checkers and Shoprite taking occupancy at Bayside Mall,” the directors said.
A good relationship was maintained with Pick n Pay, the fourth largest retail tenant for the group, and which was vacating Alberton Mall and Fourways Crossing - Growthpoint had received offers for the space at both malls.
Two Hyper stores, Northgate and Woodmead, were expected to downsize gradually.
More interest in buying office assets was perceived. “We successfully let 148 220 square metres of office space and renewed 100 046 square metres, reducing vacancies to 15.6% at the halfway stage from 19.2% at the end of 2023.”
Office vacancies in KwaZulu-Natal were 0.7%, in the Western Cape it was 7.7%, while in Gauteng it improved to 19.2% from 24.1%.
Speculative industrial developments were enjoying good take-up.
At the V&A Waterfront 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 and high demand for office space.
The growth at the V&A 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.
Hotels enjoyed consistent high demand. The marine and industrial sector enjoyed strong growth in mooring income including additional income due to diversions from the Suez Canal.
BUSINESS REPORT