Growthpoint Properties Limited (JSE: GRT) delivered a 17.6% increase in SA REIT funds from operations and a 5.2% increase in distributable income per share of 76.9 cents for its six-month period to 31 December 2021.

Distribution per share was also up 5.1% at 61.5 cents per share. Its total property assets grew by 7.7% to R164.4bn.

The Growthpoint share price remains significantly undervalued compared to its SA REIT net asset value of 2,148 cents per share, which increased by 6.2%.

Norbert Sasse, Group CEO of Growthpoint:

“These pleasing half-year results show the stability of our business. We are seeing encouraging signs of improvement, although it is too early to say that we have turned a corner while the environment remains uncertain and SA property fundamentals weak.” [16 March] Growthpoint continued to reinforce its liquidity and balance sheet strength to enhance its ability to achieve its strategic internationalisation, South African portfolio optimisation, and ambitions to create new income streams. It decreased its group SA REIT loan-to-value (LTV) from 40.0% to 39.2% and increased its ICR to 3.0-times from 2.9-times.

In line with an 80% payout ratio, Growthpoint retained R524.6m before tax, ending the period with R515.8m cash on the SA balance sheet and R6.2bn of unused RSA
committed facilities. Norbert Sasse, Group CEO of Growthpoint Properties, attributes the solid performance to increased contributions from the V&A Waterfront and ASX-listed Growthpoint Properties Australia (GOZ) and improved SA finance costs, mainly from Growthpoint’s November 2020 equity raise.

Growthpoint creates space to thrive with innovative and sustainable property solutions in environmentally friendly buildings while improving the social and material wellbeing of individuals and communities. It is an international property company invested in real estate across SA, Africa, Australia, the UK and Eastern Europe. It is the largest SA primary listed REIT, a FTSE/JSE Top 40 Index company, a constituent of the FTSE EPRA/NAREIT Emerging Index, and a long-standing inclusion in the FTSE4Good Emerging Index and the FTSE/JSE Responsible Index. During the period, Growthpoint achieved a Level One B- BBEE rating.

Growthpoint’s international investments represent 43.1% of property assets by book value and 28.0% of earnings before interest and tax. It owns 57 office and industrial properties in Australia valued at R58.5bn through a 62.2% holding in GOZ. Through its 29.4% investment in LSE AIM-listed Globalworth Real Estate Investments (GWI), Growthpoint owns an interest in 66 office and light industrial properties valued at R57.3bn in Romania and Poland, with Growthpoint’s share valued at R16.9bn. It owns seven community shopping centres in the UK valued at R11.3bn through its 60.8% investment in LSE- and JSE-listed UK REIT Capital & Regional (C&R).

GOZ’s dividend of AUD10.4 cents per share (R527.0m) increased from the prior half-year of AUD10.0 cents per share (R494.7m) while withholding tax decreased from 11% to 10%. Its balance sheet strength reflects in its low gearing level of 29.4%, AUD315.0m of undrawn debt lines, and new and refinanced facilities secured at the lowest pricing in its history.The Australian portfolio’s value increased by 11.1% in the six months. Its net tangible assets per share increased by 9.1% to AUD4.55 driven by leasing success, yield compression and rent growth across the portfolio.

All its portfolio metrics are equally impressive: it is 98.8% occupied with quality tenants and achieved a 93.0% tenant retention rate. Continuing its growth, GOZ acquired three high-quality office assets for AUD261.1m in the period and maintained its 15% in DXI by investing a further AUD60.3m.“GOZ continued its sterling performance as a core investment for Growthpoint. It upgraded its FY22 guidance from 20.6cps to 20.8cps, with a target payout ratio of 75% to 85%, and is seeking access to acquisition, funds management and merger and acquisition opportunities,” says Sasse.

Mainly due to high levels of cash on its balance sheet – EUR418.7m and EUR215.0m in an undrawn facility – notwithstanding conservative gearing of 40.1%, distributions from Globalworth of EUR13cps were down by 13.3% compared to the EUR15cps for HY21. The period saw Globalworth focusing its capital on improving its tenant spaces and growing through low-risk acquisitions and developments.

It has five light logistics facilities of a combined 98,900sqm under development in Romania and is refurbishing two mixed-use properties of 75,000sqm in Poland. Globalworth has an 11.5% vacancy rate and let more than 91,000sqm in the six months. Its portfolio collections improved to 99% for 2021.

 

“Globalworth’s portfolio metrics continue to outperform those of our SA portfolio. With strong demand from multinational tenants and limited retail exposure, it was relatively unaffected by the pandemic. Its balance sheet is strong, but its large cash holding continues to dilute earnings, and we are seeking ways to maximise this investment,” notes Sasse. C&R undertook a £30.0m equity raise which was fully underwritten by Growthpoint, resulting in an additional investment by Growthpoint of £23.7m (R480.0m). Its successful recapitalisation and debt restructure, together with two
properties being classified as managed and not owned, reduced LTV from 72% to 49%.