SAREIT

Growthpoint Properties’ (JSE: GRT) purpose-built student accommodation developments excelled at the recent SAPOA Property Awards in Innovative Excellence, winning two prestigious categories that recognise development distinction within the real estate industry.

Peak Studios in Observatory, Cape Town, was awarded top place in the Heritage category and Apex Studios in Braamfontein, Johannesburg, won the Student Accommodation Award.

These esteemed awards by the South African Property Owners Association (SAPOA) highlight the ingenuity of the winners’ vision, passion and dedication in South Africa’s modernised property industry.

The two award-winning student residences were Growthpoint’s first foray into developing purpose-built student accommodation.

Estienne de Klerk, SA CEO of Growthpoint Properties, comments: “We are delighted to be recognised for development excellence by SAPOA. The accolades underscore Growthpoint’s ongoing commitment to providing space to thrive with innovative and sustainable solutions, and student accommodation development inherently contributes significantly to societal good. We have built our internal development expertise to deliver turnkey developments for Growthpoint, the co-owned portfolios under management by Growthpoint Investment Partners and third-party owners. We believe this is a competitive advantage for both our clients and ourselves. These awards highlight the passion and commitment to excellence of everyone involved in the winning initiatives.”

Both Apex Studios and Peak Studios are part of the Thrive Student Living by Growthpoint portfolio. They opened for the 2023 academic year and have surpassed expectations, achieving 100% and 98% occupancy rates respectively, demonstrating instant commercial success as well as quality development.

“With strong demand, we have acquired a further three sites that Growthpoint’s multi-award-winning development team will complete for the 2025 and 2026 academic years, two near Wits University and one at the University of KwaZulu-Natal,” reports Amogelang Mocumi, Fund Manager of Growthpoint Student Accommodation Holdings.

Heritage Award

Peak Studios houses 563 students in a new nine-storey residence that repurposed a heritage building to serve the surrounding University of Cape Town and other private institutions of higher education. The property comprises two buildings: a new, multi-storey residential building inspired by the older heritage building facing Main Road. The new residence building reflects a contemporary interpretation of the existing building’s geometry to create a unique addition to the area.

The offices, communal areas, gym, laundry and study areas are in the heritage building, which seamlessly ties into the new residential building on the ground floor. The main circulation area spills out onto an interior courtyard, extending the space for exercise and relaxation to the outside. Hugging this larger green area, the new building creates various safe, inspiring interior and exterior spaces for studying, gathering and living.

Student Accommodation Award

Apex Studios houses 901 students over 13 storeys in a new residential building which consists of a variety of unit types, each with a private shared bathroom and kitchen lending itself to an apartment style of living. As part of its development, an existing heritage building on the site was restored externally and extensively refurbished internally to house all the unique common spaces such as the study centre, lounge areas, games room and gym.

A standout feature of Apex Studios is its prime position directly opposite the main University of the Witwatersrand campus.

“The location of a student housing residence is crucial for ease of access to campus but it is equally important to locate the residence in an area well suited to a student lifestyle. The aim is to create an environment that allows for a community to develop, where students feel at home in their units and where communal spaces nurture learning, collaboration and innovation,” says Mocumi.

Global investment manager with South African roots Ninety One has signed a new long lease with Growthpoint Properties for the building it has been in for more than two decades, signalling its commitment to the Cape Town CBD and environmental sustainability.

Ninety One is based at the Growthpoint-owned 36 Hans Strijdom building in the Cape Town Foreshore, which it shares with Investec. However, next year Investec will be relocating to its new building at the V&A Waterfront.

In a decision that was greatly influenced by Ninety One’s net zero carbon aspirations, after evaluating multiple options for its offices, including new construction, it opted to remain in the current building. The company has signed a 15-year lease for the building’s 12,800 sqm of lettable area. Utilising the building’s existing concrete structure saves the equivalent amount of carbon as would be generated by two years’ worth of Ninety One’s operations.

Growthpoint will invest a significant amount in a major green revamp of 36 Hans Strijdom, demonstrating its commitment to investing in the Western Cape and to providing its clients with sustainable solutions.

The development is due to start on 1 March 2024 and will take some 15 months to complete. During this time, Ninety One will move to temporary accommodation before returning to its greener home.

Sustainability goals, rather than appearances, have guided the design process for the refreshed building. So, while the green renovation will essentially result in a new building, most changes won’t be visible from the exterior.

Improvements will include an on-site solar plant, high-performance glazing and energy-efficient displacement air conditioning.  Energy-consuming escalators will be replaced by circulation stairs in the new layout to reduce energy usage.

Additionally, 36 Hans Strijdom recently became the first building in Cape Town to receive clean, green energy wheeled via the city’s energy grid as part of the City of Cape Town’s wheeling pilot project, thanks to Growthpoint’s well-established focus on sustainability and green energy and its partnership with licenced electricity trader Etana Energy, which is a selected pilot participant. Solar energy generated at Growthpoint’s The Constantia Village shopping centre is being exported for use at the long-term home of Ninety Once.

Thabo Khojane, Managing Director, Ninety One, says, “We are excited about the refurbishment – it will make our workplace significantly more energy efficient and is aligned with our drive to achieve net zero by 2050. Further, this building has the space to accommodate a growing staff complement, as we are increasingly supporting our growing global business from our SA head office in Cape Town.”

Paul Kollenberg, Growthpoint Properties Head of Asset Management: Offices, says, “Ninety One’s environmentally innovative real estate strategy aligns well with Growthpoint’s ambition to be carbon neutral by 2050. We are pleased to partner with Ninety One for this flagship green project and extend our longstanding relationship with this iconic South African business.”

Growthpoint’s own environmental commitments have earned it the reputation for being a leader in commercial green developments.

Dipula Income Fund (JSE: DIB) is strategically refreshing a number of its retail assets to provide modern, accessible appealing shopping experiences for retailers and customers. Its ambitious plans for advantageous upgrades and capital expenditure in its predominantly retail portfolio are already taking shape.

Dipula is an SA REIT (real estate investment trust) invested in an R10bn portfolio of 169 properties spanning one million square metres across nine provinces in South Africa. Its retail property portfolio represents more than 60% of its gross rental income. Dipula invests in urban convenience centres and lower LSM retail in townships, rural areas and towns throughout South Africa.

Izak Petersen, Chief Executive Officer of Dipula Income Fund, says, “We are optimistic about the defensive performance of retail property and believe in optimising this by keeping our shopping centres fresh, relevant and appealing to both retailers and customers. Enhancing the aesthetics, tenant mix and offering ensures that our centres continue to offer a pleasant and convenient shopping alternative in every area where we are invested.”

Dipula has earmarked more than R200 million for upgrades and capital expenditure in its retail portfolio, including projects underway at Umzimkulu and Harding Corner in KwaZulu-Natal, Gezina Galleries in Pretoria and Chilli Lane in Johannesburg, to mention a few. Dipula also recently completed the revamp of Gillwell Mall in East London.

Revamp to ramp up Gezina Galleries’ appeal

At Gezina Galleries, the 17,000 sqm community centre located to the north of Pretoria’s CBD, Dipula is busy with a project that will update the aesthetic appeal of the centre and enhance its tenant mix. A highlight of the project is the upgrade of the Gezina Galleries Checkers to the retailer’s very latest spec. Dipula is investing R40 million in the upgrade, which is scheduled for completion by March 2024.

“We are pleased that this refurbishment, which has been a while in the making, is now gaining momentum. We believe the project will be worth the wait and it will be positive for tenants, shoppers and all our stakeholders,” says Petersen.

Elevating the customer experience at Chilli Lane

Chilli Lane, the 13,000 sqm community centre in Sunninghill, is undergoing a makeover and receiving a tenant mix enhancement, including a new restaurant area with an improved restaurant offering. The R15 million project will be completed before the festive season.

“Improving the customer experience with the addition of more leisure options adds real value to this asset, which has become the go-to for its local community,” notes Petersen.

Gillwell Mall is now the biggest one-stop shopping destination in downtown East London

Patrons of Gillwell Mall in East London are enjoying an enhanced shopping experience thanks to a recent upgrade by Dipula. Gillwell Mall plays an important role as a mainstay of retail for the lower LSM market in East London.

The upgrade was completed at a cost of approximately R20 million and achieved with minimal interference to tenant trading.

Petersen reports, “This refurbishment ensures that the mall retains its position as the one-stop shopping destination of choice for our market.”

Boosting an already solid performance

The mall’s performance has been solid over the long term, with respectable tenant turnovers and vacancies at negligible levels. Petersen reports that both tenant turnovers and footfall numbers have surpassed pre-Covid levels. “Our emphasis has always been on driving footfall, improving customer experience and enhancing the tenant mix,” he says.

The project involved a façade upgrade, the creation of an additional entrance which provides direct access to the lower ground level enabling better customer flows through the centre, the addition of a new anchor and an updated tenant mix including more fashion. Boxer is the new anchor on the lower ground level that will complement Shoprite as the ground-level anchor tenant. The refreshed façade presents an iconic yet inviting face to the surrounding city.

In addition to its defensive grocery anchors, Gillwell Mall is tenanted by a variety of national clothing retailers, together with service-oriented tenants and some entertainment and dining offerings aimed at providing a single convenient destination to meet shoppers’ primary needs.

A one-stop destination

Gillwell Mall has just over 22,000 sqm of gross lettable area (GLA) and is conveniently situated at the intersection of Fleet Street and Gillwell Road. This prime location connects East London to the airport, Port Alfred, Gqeberha, and the city’s busy industrial area near the harbour. Serving as a focal point between these areas and local townships, the mall mainly caters to residents and workers in the area. Additionally, it attracts students from the nearby University of Fort Hare campus and residences, as well as numerous government employees living and working in the area.

“East London’s weather can be extreme, and the mall provides the ideal refuge for our customers. At the same time, people have access to quality products and services and can shop, do their banking, withdraw social grants and take care of a variety of personal tasks all under one roof,” Petersen says.

Gillwell Mall has materially enhanced the retail offering in the East London CBD and is now its largest single retail facility. “The centre plays a role in providing neat and dignified shopping in a CBD where there is massive underinvestment,” Petersen emphasises.

The upgrade is already bearing fruit: trading, footfall and dwell times at the centre have significantly increased. “Gillwell Mall is one of our core retail assets and aligns perfectly with our investment philosophy of providing relevant, convenient retail that is defensively tenanted and serves the most important needs of shoppers,” Petersen notes.

Playing an integral role in the community

Dipula’s shopping centres play more than a retail role in their local communities. “Dipula places immense importance on sustainable and community-based initiatives aimed at improving people’s lives beyond the retail experience,” says Petersen.

Gillwell Mall is a fitting example of this. It created around 100 jobs during its revamp. An estimated 400 people hold permanent jobs at the centre. A key feature of the mall is its basement taxi rank, offering easy access and a safe, organised space to the community given that the mall serves as a transit hub, being near many public transport resources.

From a corporate social investment perspective, the mall provides sheltered trading spaces for informal vendors, sponsors sports clubs and NGOs and showcases local artists.

Furthermore, as is the case at several of Dipula’s other retail centres, plans are underway to enhance sustainability with efficient lighting and alternative water and power backups, including solar energy.

Highlights from Vukile Property Fund’s pre-close update for the 30 September 2023 interim period.

South African portfolio:

The defensive nature of the South African portfolio and tenant mix, the dominance of Vukile’s assets and active asset management activities continue to deliver excellent results.

• Improved footfalls (7% yoy) and sales (up 3.6% yoy)
• Trading density growth (3.5% yoy) in all main segments, led by township (5.3%) and urban (4.8%) shopping centres
• Vacancies are steady at 2.0% with strong demand for space across all portfolio segments
• Rental reversion positive at +2.4% and strong collection rate of 100%
• WALE of 3.2 years extended by recent transactions to 4.2 years.

 

Spanish portfolio:

The Castellana portfolio continues to lead in the Spanish market in operating performance metrics with the impact of our asset management interventions delivering great returns.

• Impressive growth in footfall (7.4% yoy) and sales (9.7% yoy)
• Highest occupancy (98.8%) and collection rates (98.7%) in its market
• 31% average rental growth
• Lar Espana proving to be a great investment.

 

Debt and treasury:

Overwhelming support from the local debt capital markets was evidenced by the very successful bonds issuance in August 2023 that attracted significant investor demand and priced below guidance.

• Balance sheet metrics in line with FY23
• Group LTV anticipated to be c.44% and Group ICR at c.3 times
• Strong liquidity with R2.7 billion of cash and undrawn committed facilities (2.1 times covered)
• All FY24 expiries have been repaid, refinanced or renegotiated
• GCR reaffirmed corporate long-term credit rating of AA_(ZA) in August, with a stable outlook
• Managing interest rates proactively, with a focus on Castellana’s €256 million facility’s fix maturing in September.

Governance

The board refresh process is underway with the appointment of two independent non-executive directors – Jon Zehner, Vice Chairman of LaSalle Investment Management, one of the world’s leading real estate investment managers, and James Formby, former chief executive officer of Rand Merchant Bank (RMB). They will add significant international and capital markets experience to the board as Vukile seeks to further strengthen the board with the right balance and skills for the longer term.

Energy and sustainability

• Aim to increase PV to 30 MWp by FY25 (19% of portfolio energy consumption)
• Plan to add 7 060KWp to the existing 14 847KWp in FY24
• 2 001KWp has already been completed in FY24 and a further 5 059KWp is under construction.

Capital allocation

• BT-Ngebs should transfer in Q4 FY24. Previous asset sales proceeds to fund R400m acquisition at c. 9.25 yield
• Vallsur and El Faro value-add projects are accretive and asset-enhancing. Funds are in place to lift El Faro ownership to 100%
• As signalled to the market, Vukile continues to seek new opportunities at very attractive yields in Europe in disciplined deals that make both financial and strategic sense. However, there are no transactions currently on the table.

Guidance

Vukile confirms its guidance for FY24 at:

• Growth in FFO per share of 3% to 5% (148cps to 152cps)
• Growth in Dividend per share of 7% to 9% (120cps to 123cps)

Laurence Rapp, Chief Executive Officer of Vukile Property Fund, says, “We are pleased to confirm our guidance based on our actual performance to date, with all operating metrics showing trends of sustained growth. The defensive nature of our South African portfolio and its nodal dominance is a buffer against the increasingly more difficult macro environment with higher interest rates affecting consumers. Trade in Spain remains positive and consumer confidence is buoyant for now. However, there is still potential for higher interest rates to influence consumer sentiment. The impact of higher finance costs has already been factored into our forecasts.”