Growthpoint Properties half-year performance: Solid results amid strategic advancements

• Growthpoint's Half-Year Performance: Growthpoint exceeded expectations with a 3.9% increase in distributable income per share (DIPS), upgrading its FY25 outlook to positive growth.
• Strategic Portfolio Enhancements: Growthpoint improved its SA portfolio quality, reducing office exposure, increasing logistics assets, and investing in developments and sustainability efforts.
• International Investment Optimisation: Growthpoint continues to streamline international assets, with key investments in Australia, Poland, Romania, and the UK, maintaining strong balance sheet resilience.

Growthpoint Properties Limited (JSE: GRT) has delivered stronger-than-expected results for the six-month interim period ending 31 December 2024. The company reported a 3.9% increase in distributable income per share (DIPS), reaching 74.0cps.

This is a positive sign for the company, especially considering the broader macroeconomic pressures it has faced in recent months. The company also upgraded its guidance for the financial year ending 30 June 2025, forecasting positive growth of 1% to 3%, a remarkable turnaround from its earlier projection of a 2% to 5% decline.

This performance has been driven by improvements in South Africa’s operational portfolio, stronger finance cost expectations, and the continued outperformance of its iconic V&A Waterfront development in Cape Town.

Despite challenges such as higher borrowing costs and the complex global economic landscape, Growthpoint has maintained resilience, positioning itself for future growth. CEO Norbert Sasse emphasises that the company’s strategic decisions and careful management of its portfolio have been key to navigating this period of uncertainty.

Financial Performance and Outlook

‍For the six months ended December 2024, Growthpoint delivered a solid performance in the face of ongoing macroeconomic pressures. The total dividend per share (DPS) for HY25 was 61.0cps, reflecting a 3.7% increase from HY24, while total property assets stood at R155.2 billion, down by 11.2% from the previous period. This decline is primarily due to the strategic disposal of Capital & Regional (C&R) shares, aimed at optimizing Growthpoint's international investment portfolio.

One of the standout features of Growthpoint’s performance was its improvement in finance cost management. The company’s South African REIT loan-to-value (LTV) ratio decreased to 40.8%, down from 42.3% at the end of FY24, bolstered by the disposal of C&R.

Despite an increase in interest rates within South Africa, Growthpoint benefited from a lower weighted average cost of debt of 9.2%, compared to 9.6% in HY24. The company also boasts a robust liquidity position, with R0.8 billion in cash and R5.2 billion in unutilized committed debt facilities.

Commenting on the results, Norbert Sasse, CEO of Growthpoint, said, "Interest rate pressures have started to ease, although the pace of future reductions is still unclear. Growthpoint remains committed to balance sheet resilience for the long term, underpinning our ongoing access to competitive funding and maintaining financial flexibility."

Strategic Portfolio Enhancements

‍Growthpoint has undertaken several strategic initiatives to improve the quality of its South African property portfolio. These efforts include a focus on disposals, developments, and targeted investments aimed at enhancing the overall portfolio mix. Over the past decade, the company has reduced its asset base by 28%, from 471 properties to 341, and reduced the gross lettable area by 14.7%. This has led to a sharper focus on quality over quantity, improving both the resilience and profitability of its portfolio.

The company’s South African portfolio, which is valued at R67.3 billion, contributed 50.1% of the DIPS for the half-year. Growthpoint saw a notable improvement across all sectors in South Africa, with retail, office, and logistics/industrial properties benefiting from higher occupancy rates, improved rental growth, and better expense efficiencies. The logistics and industrial portfolio, in particular, showed strong growth, with vacancy rates dropping from 5.2% to 3.5%, and like-for-like net property income (NPI) growth of 3.5%.

Growthpoint's focus on sustainability is also evident in its ongoing efforts to reach carbon neutrality by 2050. Notable sustainability achievements in the period included the Meadowbrook Estate in Johannesburg, which became South Africa's first industrial property to earn a 6-Star Green Star Existing Building Performance (EBP) rating from the Green Building Council South Africa (GBCSA).

Furthermore, Growthpoint installed solar photovoltaic panels at seven of its shopping centres during the period, marking a significant step toward reducing the environmental impact of its properties.

International Investments and Strategic Movements

‍On the international front, Growthpoint has continued to optimize its global investment portfolio. Growthpoint disposed of its entire shareholding in Capital & Regional (C&R) to New River REIT, a move that helped simplify the company’s international exposure and strengthen its South African portfolio. The proceeds from the sale were primarily used to reduce debt, providing additional financial flexibility.

The company’s key international investments remain in Growthpoint Properties Australia (GOZ), Globalworth Real Estate Investments (GWI), and Lango Real Estate Management. Growthpoint’s 63.7% investment in GOZ remains a cornerstone of its international portfolio. GOZ, which focuses on high-quality industrial and office properties in Australia, continues to perform well, with occupancy levels remaining high at 94% and a strong pipeline of new developments.

Meanwhile, Growthpoint continues to support its 29.6% investment in Globalworth, a leading investor in office and mixed-use developments in Poland and Romania. Although the performance of Globalworth was impacted by rising interest rates, Growthpoint remains optimistic about the long-term value of this investment. Growthpoint also has a significant investment in Lango Real Estate, which focuses on commercial real estate across key African gateway cities.

The V&A Waterfront: A Standout Performer

Growthpoint’s 50% interest in the V&A Waterfront in Cape Town continues to be a major contributor to its financial performance. The precinct, which is valued at R12.4 billion, saw a remarkable 16.6% increase in like-for-like NPI. This outperformance is attributed to increased tourism and retail activity, and the successful repurposing of buildings like the Union Castle Building. The V&A Waterfront’s hospitality segment also saw impressive growth, with income from hotels, residential, and leisure rising by 37%.

“Once again, the V&A delivered stellar returns, benefiting from increased tourism and retail activity,” Sasse commented. “It remains a key asset in our portfolio, with exciting future developments underway, including the conversion of the Table Bay Hotel into an Intercontinental Hotel and the opening of a new luxury retail wing.”

Looking Ahead: The Way Forward

‍Looking to the future, Growthpoint is optimistic about the prospects of its South African portfolio, which has stabilised and is showing signs of continued improvement. “We continue to see positive momentum across the portfolio, underpinned by operational resilience and strategic execution,” said Sasse. “This is supported by the improved sentiment in the country under the Government of National Unity, along with the improving interest rate environment.”

Growthpoint plans to execute R2.8 billion in strategic non-core asset sales in South Africa for the remainder of the financial year. The company also expects the V&A Waterfront to continue delivering mid-single-digit growth despite ongoing redevelopment projects. With a commitment to maintaining financial flexibility and a focus on enhancing the quality of its portfolio, Growthpoint remains well-positioned to generate long-term value for its stakeholders.

In conclusion, Growthpoint’s solid half-year performance, strategic portfolio enhancements, and ongoing focus on sustainability and operational efficiency provide a strong foundation for continued growth. As the company navigates both local and international market conditions, its focus on balance sheet strength, portfolio quality, and strategic investments will remain key drivers of success.

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