Growthpoint reports robust performance and positive property cycle

Growthpoint Properties Limited, South Africa’s largest property company, has reported a solid operational performance for the financial year ending June 30, 2024. The company demonstrated notable progress across both its local and international investments, despite facing significant economic headwinds.

Norbert Sasse, Group CEO, highlighted the year’s achievements: “The improvement in our domestic portfolio’s property fundamentals and the strong operational performance of our international investments indicate that we may have passed the lowest point of the curve and are now seeing signs of improvement.” This positive outlook comes in the face of broader challenges including high interest rates and lower dividends from certain international holdings.

In the local market, Growthpoint's South African portfolio showed considerable strength. The V&A Waterfront in Cape Town, in which Growthpoint holds a 50% stake, reported exceptional results. “The V&A expects mid-single digit growth next year as it undertakes major upgrades,” Sasse noted, underscoring the precinct's continued success despite ongoing redevelopment efforts. The Waterfront achieved impressive rental levels and virtually no vacancies, reflecting strong demand and operational efficiency.

The South African property market overall has shown positive trends, with improvements in rental growth and vacancy rates. The office sector, in particular, witnessed a reduction in vacancies from 19.2% to 15.1%, while retail and industrial sectors also experienced notable gains. Growthpoint’s investment in upgrading and developing high-quality assets is paying off, as evidenced by the increased portfolio value and improved property metrics.

Internationally, Growthpoint's investments also performed robustly.

‘The Waterfront achieved impressive rental levels and virtually no vacancies, reflecting strong demand and operational efficiency.’

The company's interests in Growthpoint Properties Australia (GOZ), Capital & Regional (C&R), and Globalworth Real Estate Investments (GWI) all contributed positively to the group’s results. “GOZ remains a core investment for Growthpoint, and we continue to evaluate all options to maximise the value of our investments in C&R and GWI,” said Sasse. Despite facing challenges from higher global interest rates, GOZ’s solid leasing performance and strong balance sheet were highlighted as key positives.

C&R, focusing on community-centric retail, saw a 17.4% increase in net rental income due to acquisitions and strong leasing results. Meanwhile, GWI improved its leasing outcomes despite a reduction in portfolio value due to significant refinancing costs. Sasse acknowledged these mixed results, noting that “GWI has bedded down its bond refinance, which places the company more firmly on the front foot.”

The impact of higher interest rates has been a significant challenge, affecting Growthpoint’s distributable income, which fell by 10% in line with market guidance. Sasse remarked on this issue, saying, “Interest rates are anticipated to come down, and the effect of this is likely to start showing in our business from the second half of FY25.” The company is navigating these challenges by focusing on strategic initiatives to enhance liquidity and balance sheet strength.

“Interest rates are anticipated to come down, and the effect of this is likely to start showing in our business from the second half of FY25.”

In terms of financial metrics, Growthpoint’s total property assets decreased by 2.8% to R174.7 billion, while the loan-to-value (LTV) ratio increased to 42.3%, influenced by valuation write-downs. Despite these pressures, Growthpoint maintains a strong financial position with significant access to liquidity and stable credit ratings.

Looking ahead, Growthpoint’s strategy involves continuing to invest in high-quality assets and pursuing opportunities in its international investments. The company remains committed to sustainability and ESG goals, including achieving carbon neutrality by 2050.

Sasse concluded with optimism about the future: “We have made gains in every area of opportunity available to us this year. Growthpoint is a strong, diversified business with talented employees, a solid financial foundation, and a clear strategy for delivering value to all stakeholders. We have much to look forward to.”

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