Archives for March 2023

Growthpoint Properties reports half-year DPS growth of 4.6%

Growthpoint Properties Limited (JSE: GRT) delivered a 4.6% increase in half-year dividend per share (DPS) to 64.3cps and 2.3% growth in SA REIT funds from operations (FFO) of R2.7bn for the six-month period to 31 December 2022. Distributable income per share (DIPS) was also up 1.3% to 77.9cps. Group property assets grew by 2.0% to R174.1bn and hard currency dividend income increased by 10.1% to R763m.

Norbert Sasse, Group CEO of Growthpoint Properties, attributes this defensive performance to excellent results from the V&A Waterfront and ASX-listed Growthpoint Properties Australia (GOZ), improved letting and reduced vacancy in the South African portfolio, and Growthpoint Investment Partners’ ongoing attraction of quality co-investors.

Sasse comments, “Growthpoint’s results achieved during another exceedingly challenging period reflect the strength and diversification of our businesses and the quality of our earnings.”

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 in SA, across Africa, Australia, Poland, Romania and the UK, and the largest SA primary listed REIT. Growthpoint is a FTSE/JSE Top 40 Index company, a constituent of the FTSE EPRA/NAREIT Emerging Index, and has a long-standing inclusion in the FTSE4Good Emerging Index and the FTSE/JSE Responsible Index.

Growthpoint continued to focus on robust balance sheet and liquidity positions to execute its three strategic thrusts: international expansion, SA portfolio optimisation and growing income streams from Growthpoint Investment Partners’ assets under management (AUM).

In line with its steady performance, Growthpoint increased its dividend payout ratio to 82.5% from 80.0% at the prior half year, retaining R472.9m before tax to fund capital expenditure and development and execute its strategies while ensuring balance sheet strength.

Its conservative group SA REIT loan-to-value (LTV) ratio increased slightly to 38.8% mainly due to debt funded acquisitions in Australia. The REIT ended the period with R1.6bn cash on its SA balance sheet and R10.3bn in SA unused committed debt facilities. This includes contingencies for the upcoming maturity of its USD Eurobond of R7.4bn in May 2023, which it will repay with facilities in place.

Growthpoint’s strategic international investments continued to grow incrementally to 43.7% of property assets by book value and 31.0% of earnings before interest and tax. It owns 59 office and industrial properties in Australia valued at R60.5bn through a 62.7% shareholding in GOZ and five community shopping centres in the UK valued at R7.2bn through a 61.5% investment in LSE- and JSE-listed Capital & Regional (C&R). Through a 29.4% investment in LSE AIM-listed Globalworth Real Estate Investments (GWI), Growthpoint owns an interest in 71 office and industrial properties valued at R56.1bn in Romania and Poland. Its effective share is R16.5bn.

GOZ delivered a stellar performance with AUD net property income up by 19%, driving up AUD FFO by 12.5%, to deliver 2.9% distribution growth of AUD10.7cps. Effective withholding tax increased from 10.0% to 14.0%. The balance sheet strength of this core investment for Growthpoint can be seen in its low gearing of 34.5% and AUD357.4m of undrawn debt.

All GOZ portfolio metrics are excellent: it is 96.7% occupied by gross lettable area (GLA), with 95% of the portfolio leased to the government, listed and large organisations. GOZ has successfully integrated its recent acquisition of Fortius Fund Management, which introduced AUD1.9bn of third-party funds under management to GOZ.

“GOZ delivered a fantastic performance to extend its track record of quality asset management, ESG performance and attractive long-term total returns. It has confirmed its FY23 DPS guidance of AUD21.4cps,” says Sasse.

GWI produced a resilient performance even with global challenges affecting its operating markets. It offered a scrip dividend of EUR0.15cps for its half year to 31 December 2022, equalling R166.6m for Growthpoint, which all major shareholders have committed to take up. GWI sustained good liquidity and remained moderately geared at 42.7%, with EUR625m of new financing secured and no material debt maturity until March 2025.

It continued its capital focus on logistics facilities in Romania, acquiring a small-unit logistics facility of 7,100sqm and delivering six developments of 104,400sqm. It has three new logistics facilities under development totalling 30,000sqm. In Poland, it completed refurbishing two mixed-use properties of 74,800sqm. GWI achieved good letting and reduced vacancies slightly to 14.4%.

“GWI is showing stable performance with increased inflation underpinning rental increases, although there are some signs of operating metric softness and a slight fall in valuations.  We continue to seek solutions to maximise the value of this investment,” notes Sasse.

C&R declared a dividend of GBP2.75pps, totalling R50.4m for Growthpoint, which will be reinvested. C&R’s reset LTV ratio remained stable at 41.0%. It disposed of its Blackburn asset for GBP40m. Valuer’s rental assumptions increased despite valuations declining by 5% on a like-for-like basis because of increases in risk-free rates.

Its community-focused needs-based retail strategy remains relevant and is driving improved operating metrics, including footfalls increasing by 7% compared to 2021. C&R delivered solid letting in the period with 54 leases signed at a 34% premium to previous rentals. Its portfolio is 92.3% let by GLA.

“We continue to believe in this platform, its management and its ‘needs-based’ community retail strategy. C&R is showing pleasing balance sheet stability and operational resilience. As the business continues to evolve, so is its management platform, and it has a clear roadmap detailing the potential to grow adjusted profit by more than 20% in the medium term,” Sasse says.

Good letting activity in Growthpoint’s SA portfolio reduced vacancies, which returned to single-digit territory, moving from 10.3% to 9.9% in the six months. Its SA property values increased for the first time since the pandemic, growing 1.4% (R998m) to R70.3bn and signifying greater stability and some recovery.

Growthpoint owns and manages a diversified core portfolio of 371 retail, office, and industrial properties across SA. It manages these assets to optimise their value over the long term but also seeks to sell non-core assets and recycle capital to rebalance its portfolio towards higher growth sectors and regions. It sold 19 non-strategic properties for R756.3 during the period, making a profit on book value of R7.6m. Growthpoint has sold R10.5bn of properties in South Africa since 2017.

Strong leasing performance in Growthpoint’s industrial property portfolio saw vacancies significantly down in the half year, from 5.7% to 4.3%. Coastal areas outperformed. This set the stage to successfully negotiate better annual lease escalations, supported by a higher inflationary environment, however negative reversions on renewal persist. Positive key metrics drove up the industrial portfolio value by 1.9%. Taking advantage of the demand for industrial properties, Growthpoint continued selling non-core smaller assets to owner-occupiers and investors.

The retail property portfolio reflected pleasing performance with good trading density growth of 8.6% and core vacancies at a stable low 3%. While leases continued to revert negatively and rental escalations on renewal remained under pressure in 2022, Growthpoint is starting to achieve renewal growth and improved lease terms, supporting retail portfolio valuations increasing 1.9%.

More staff are returning to offices in line with company policies and with the ongoing impact of loadshedding. Businesses that previously gave up space are starting to take up office space again, and as such interest in Sandton offices is picking up. Vacancies of 20.4% show a stabilisation, coming down slightly from 20.7% over the six months. The renewal success rate improved from 58.0% to 66.4% in a market where tenants continue to consolidate and reduce space. The office portfolio resumed its capital growth at a modest 0.7%, reflecting better sentiment and stability for the sector notwithstanding negative reversions on renewal.

Growthpoint’s broad development expertise creates opportunities to generate profits and supports its disposal strategy by unlocking the best value from non-strategic assets. The contribution to distributable income from trading and development was a steady R77.0m for the period.

Growthpoint strives for excellent environmental, social and governance (ESG) performance. During the year it continued its solar energy drive, incentivised to help its tenants to avoid the impacts of loadshedding, and in pursuit of its environmental commitments and carbon neutral 2050 target.

Loadshedding in SA started in late 2007, and since then, Growthpoint has evolved and improved its response, first with generators and now focusing on solar power. Growthpoint’s active investment in solar plants will see it more than double its 13.5MWp of installed renewable energy generation to 27.4MWp before end-June 2023 at an investment of R210m. In total, this takes the replacement cost of its solar plants to around R400m. It also has 332MW of generation potential from 334 backup generators and spent R47m spent on diesel during the six months. Growthpoint’s energy management ensures that its portfolio of properties is well backed-up to sustain tenant businesses.

“Our SA business is well positioned with a strong balance sheet and good liquidity. We are encouraged by improvements in the industrial and retail portfolios and pleased at the increased stability evident in the office sector. Our focus remains steadily optimising our SA portfolio, including reducing its reliance on the national electricity grid and fossil fuels,” says Sasse.

The post-pandemic rebound in international tourists and the return of events led to excellent performance across the board from the iconic V&A Waterfront, Cape Town, in which Growthpoint has a 50% interest with its share of property assets valued at R9.2bn. Precinct-wide, vacancies are at a low 0.7% and demand for space is strong. The V&A achieved exceptional growth in net property income of 23.0%. Record December 2022 retail sales surpassed R1bn, 28% higher than December 2019.

Restaurants that closed during the pandemic reopened their doors, and the hospitality sector delivered a strong performance. The occupancy and rate metrics of all V&A hotels increased and were on par with or exceeding pre-Covid levels. The V&A ensured that all retail, restaurants and hotels could trade through the 208 days of loadshedding in 2022, which carried a R21m diesel cost.

Demand for V&A offices is strong, with vacancies a mere 1.2%. The new 10,500sqm office development in the Canal District will be entirely occupied by Investec and will be completed in the last quarter of 2023. Residential-to-let vacancies dropped from 18% to 5% over the six months. Marine and industrial achieved a 45% increase in net property income. The cruise season launched in October 2022 with 18 vessel visits and some 42,000 passengers and crew processed at the V&A. A further 52 vessels are booked to the May 2023 season close. Casual berthing of superyachts and charter vessels performed excellently.

“The V&A has shrugged off the effects of the pandemic to deliver a very healthy performance, and all sectors are enjoying low vacancies and strong demand,” says Sasse.

Growthpoint Investment Partners contributed R48.1m in management fees and R79.0m in dividends to Growthpoint. It continued growing AUM and attracting appetite from top-quality co-investors. Growthpoint’s capital-efficient alternative real estate co-investment platform, which includes three funds, added nearly R1bn AUM during the period as it grows towards its goal of R30bn AUM by the end of FY27.

Growthpoint Healthcare REIT delivered DPS growth of 7%, attracted a R500m investment from the Namibian Government Institutions Pension Fund (GIPF Namibia) and sold 15% of its management company to Kagiso in February 2023. GIPF’s investment reduced Growthpoint’s shareholding to 39.1%. SA’s first unlisted healthcare REIT has a property portfolio valued at R3.6bn. It acquired its first logistics asset in the period and has earmarked some of the R340m of debt funding available from the IFC for two development projects that will increase healthcare facilities in KwaZulu-Natal.

Growthpoint Student Accommodation REIT performed in line with original income expectations. It attracted a R250m investment from GIPF Namibia and is in the process of a R2.5bn capital raise, which will close in August 2023. Growing its AUM, it acquired one plot of land and is developing two new student accommodation projects for the 2024 academic year. Growthpoint has a 14.3% investment in SA’s first unlisted purpose-built student accommodation REIT, which has a R2.7bn portfolio of 6,443 beds in Johannesburg, Pretoria and Cape Town.

Lango Real Estate successfully concluded a capital raise of USD125m, including an investment from Growthpoint of USD30m (R513.8m). The funds will be deployed to enter the Nairobi, Kenya, market and reduce debt. The protest-damaged Circle Mall in Nigeria is fully reinstated and commenced trading in phases from November 2022. Growthpoint holds an 18.4% shareholding in Lango, which has a USD612.3m portfolio of prime office and retail assets in Ghana, Nigeria and Zambia, and land in Angola.

Growing Growthpoint Investment Partners is a strategic focus. We aim to increase AUM and seek new co-investment opportunities that appeal to quality investment partners but are distinct from Growthpoint’s retail, office and industrial core assets,” says Sasse.

Growthpoint’s diversified portfolio, strong balance sheet and stable hard currency dividend income streams position the company defensively for the rest of FY23. However, with elevated uncertainty in the local and global macroeconomic environment and rising interest rates and inflation, Growthpoint still expects to deliver muted full-year DIPS growth.

Growthpoint has a defensive, diversified business with the great strengths of skilled people and a strong balance sheet. We have clear and robust strategies and remain committed to creating and conserving value for all our stakeholders, says Sasse.

Attacq, Emira buck SA REIT underperformance in January, February

South Africa’s Real Estate Investment Trusts (REITs) – Attacq and Emira Property Fund – bucked the trend with excellent performance in January and February, says the South African Real Investment Trust (SAREIT) Association.

The statement follows the publishing of its February Chart Book, which provides an in-depth analysis of the SAREIT sector.

The association says that Attacq’s announcement that the company had concluded a non-binding term sheet with the Government Employees Pension Fund, represented by the Public Investment Corporation (PIC), helped to buoy the sector.

Earlier this month, Attacq announced the proposed acquisition of 30% of the ordinary shares and shareholder loans in Attacq Waterfall Investment Company (AWIC) for R2.5 billion and the injection of a further R300m into AWIC as a shareholder loan.

The market responded positively to the announcement, and Attacq’s share price gained around 19% in February.

In the case of Emira, its share price rallied over 10% following a strong set of results for the six months that ended 31 December 2022. Both distributable earnings and distribution per share comfortably beat analyst expectations.

However, Accelerate Property Fund’s share price fell more than 25% after the company announced an R50 million renounceable rights issue at 70c per share to provide the company with the short-term liquidity needed to enable the repositioning of Fourways Mall.

Merchant West Investments portfolio manager Ian Anderson said persistent load-shedding between stages 3 and 6 is weighing heavily on investor sentiment towards South Africa.

“It is difficult to quantify the full impact of load-shedding across the sector since different property types and tenants have different power needs.

“However, most companies in the sector have already done significant work to protect their tenants from load-shedding. This represents a significant commitment to tenants in an effort to address the crisis,” he said.

Anderson says that REIT activity should increase in March and April as some REITs release their first-quarter results.

Despite these challenges, the ALPI and SAPY delivered respective total returns of -1.9% and 0.5%, which places the SA-listed property sector amongst the best-performing markets globally for the calendar year.

“We attribute SA property’s relative outperformance to its lower starting valuations in comparison and the milder adjustment to discount rates as domestic bonds rose by a smaller margin than global bonds,” according to Sesfikile Capital.

SA listed property capped 2022 with an outstanding fourth quarter as the ALPI and SAPY gained 18.2% and 19.3%, respectively.

The chart book is a monthly publication and can be downloaded from the SAREIT Association’s website here

Octodec to have a secondary listing on A2X

JSE listed REIT, Octodec Investments, today announced that it has been approved for a secondary listing on A2X Markets.

The group informed shareholders that its primary listing on the JSE and issued share capital will be unaffected by the secondary listing on A2X.

A2X is a licensed stock exchange authorised to provide a secondary listing venue for companies and is regulated by the South African Financial Sector Conduct Authority in terms of the Financial Markets Act 19 of 2012.

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Bi-annual SA REIT conference set for February 2024

South Africa’s Real Estate Investment Trust (SA REIT) Association says its popular bi-annual conference has been set for 15 February 2024 in Johannesburg, where industry leaders, investors, experts and bankers will bring insights on the current state and future of the REIT sector and property industry.

The sector’s conference, solely sponsored by Nedbank Corporate and Investment Banking’s Property Finance Division, comes as the country’s REITs celebrate their 10th anniversary.

The macro-economic environment, the impact of government economic policies and future trends affecting the sector, and investment opportunities are among the topics that will attract heated debates at the conference.

“The conference is always rich in content, and we are accustomed to strong representation from the REITs, investors, financiers and other property-focused professionals,” says Gary Garrett, Managing Executive Property Finance at Nedbank CIB.

“The crux of the conference is based on high-quality content, strong speakers and panellists and opportunities to network with industry leaders,” he adds.

Garrett says Nedbank is a proud sponsor as it strives to build on its strategic relationships in the property sector and the REITs.

“As a sponsor, Nedbank sees the conference as an opportunity to propel the sector forward and play a role in its future. It is a special year as the SA REITs celebrate their first decade of operation. They have endured challenges through that period, but overall, the sector is as robust as ever and continues to deliver value,” says Garrett.

Geoff Jennett, Chief Executive Officer of the Emira Property Fund and SA REIT Conference Committee Chairperson, says delegates can expect to hear engaging and enlightening debate on pertinent issues faced by the REITs sector and property industry.

He says REIT CEOs will attend and participate in panel and plenary discussions, ensuring delegates hear industry leader views and opinions first-hand.

“Another key aspect of the conference is the networking that takes place amongst this particular group of participants – the opportunity to meet, engage and discuss matters with fellow delegates is a highly valued part of the conference,” adds Jennett.

He also says the 10th anniversary of the REITs is an important milestone for a sector that has made huge strides despite the country’s economic challenges.

Jennett is optimistic about the sector’s future and says the industry is poised for more growth over the next 10 years.

The SAREIT Association’s role is to promote the country’s REITs as an investment class locally and internationally while addressing issues and meeting challenges within the sector.

The conference master of ceremonies is Michael Avery, a well-known columnist and radio host.

Registration will open in July 2023. For further information on the conference, contact Joanne Solomon, Chief Executive Officer, SA REIT Association at

Trade Park meets KZN industrial demand

Growthpoint Properties has broken ground on Phase 2 of Trade Park, a prime industrial park in the Mount Edgecombe industrial precinct in KwaZulu-Natal, north of Durban. The R180m development is in response to overwhelming demand for, and a genuine scarcity of, quality A-grade industrial facilities in the region.

Trade Park is a midi-unit industrial park comprising two phases of approximately 20,300sqm and 21,600sqm respectively. The highly successful Phase 1 was completed in 2019 and comprises 15 A-grade units ranging in size from 1,000 sqm to 2,000 sqm. Phase 2 broke ground at the end of January 2023 and comprises four new A-grade units ranging in size from 4,500 sqm to 6,500 sqm.

Located in the well-established area of Mount Edgecombe North on 52 Siphosetho Road, and close to large residential, industrial, and retail developments, the park provides easy access to the R102 and N2 freeways and is halfway between the busy Durban Harbour and King Shaka International Airport – about 20km from each.

Mount Edgecombe has quickly become an established logistics node, driven by the new C3 Corridor road and a dearth of new industrial land around Durban Harbour. The increasing growth of the nearby Cornubia development and the recent upgrading of the N2 and M41 interchange make access to this desirable location a strong drawcard.

Growthpoint Properties identified a gap in the market for midi- and maxi-units in the Mount Edgecombe area several years ago.

“Trade Park has been designed to meet this need with a first-class industrial park designed for businesses that rely on excellent transport access,” says Greg Worst, Growthpoint Properties Regional Head – KZN. “Strong take-up in Trade Park Phase 1 is a testament to the fact that it is fulfilling a real requirement in the market.”.

The precinct design is informed by a conscious decision to separate the various functions within Trade Park and thereby maintain clear routes and links for people and vehicles. The functionality of the warehouses, the movement of trucks, and industrial processes are all kept separate from the office links, where staff and visitors can move about freely.

“Separating the offices from the industrial processes allows for a different treatment of the office spaces, which include more contemporary features and materials. It also provides the opportunity to create more outward-focused offices which overlook green areas,” says Worst. Beautifully landscaped gardens within the precinct are all fully maintained.

The external form and aesthetic quality of the warehouses is simple, functional and modern with subtle touches to modulate the visual scale of the warehouses and elevate the aesthetic quality of the park.

Each warehouse will have its own offices and ablution facilities as well as cantilevered roof canopies to all roller shutter doors to ensure adequate weather protection at loading areas. 

Trade Park Phase 2 boasts extensive features, including 24/7 Security and access control, a three-phase power supply, roof heights of 14m to eaves, and automatic sprinkler systems spec’d for complete compliance.

Sustainable building practices ensure that every aspect of this development is efficient, cost-effective and sustainable. Energy efficient air-conditioning, lighting and structural compliance for solar panels have been included in the design.

“Environmental sustainability is at the core of Growthpoint’s business, and we are committed to integrating green building principles into all our developments,” Worst notes.

Trade Park’s energy-efficient features include a host of energy-efficient lighting solutions in the warehouses and office spaces, as well as in external and security areas. Its design allows for as much natural light as possible within the buildings, which helps reduce electricity costs, hot water heat pumps, roof insulation and external sun louvres, designed to reduce the energy needed for heating and cooling.

The first units at Trade Park Phase 2 are currently being leased and will be ready for occupation from October 2023.

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