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Property recovery

Growthpoint delivers half-year results ahead of expectations

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Growthpoint delivers half-year results ahead of expectations and upgrades outlook to positive growth for full year

Growthpoint Properties Limited (JSE: GRT) delivered stronger-than-expected results for its six-month interim period ending 31 December 2024, reporting distributable income per share (DIPS) of 74.0cps, up 3.9% from HY24, while maintaining its distribution payout ratio at 82.5%.

In line with the first-half performance, Growthpoint upgraded its DIPS guidance for the financial year ending 30 June 2025 from -2% to -5% to positive growth of 1% to 3%, which will be driven mainly by the continued improvement in the operational performance of the South African (SA) portfolio, better finance cost expectations and continued outperformance from the V&A Waterfront. The stronger performance evident in the half-year results will moderate slightly for the full year.

Norbert Sasse, Group CEO of Growthpoint Properties, comments, “Growthpoint has done well to deliver strong results while effectively executing our strategic priorities, streamlining international investments through the disposal of Capital & Regional pls C&R) and further strengthening our SA portfolio. This progress was reflected in the improved performance of the SA portfolio. Additionally, disciplined treasury management kept finance costs below expectations, stringent cost control enhanced efficiency, and again, the V&A Waterfront outperformed.”

Financial Performance

Growthpoint delivered solid results despite ongoing macroeconomic pressures. The total dividend per share (DPS) for HY25 is 61.0cps, a 3.7% increase from HY24. Total property assets stand at R155.2bn, reflecting a decline of 11.2% during the six months, mainly due to the strategic disposal of C&R to optimise the international investment portfolio.

The Group SA REIT loan-to-value (LTV) ratio decreased to 40.8% from 42.3% at FY24, mainly due to the disposal of C&R. The interest cover ratio (ICR) was unchanged at 2.4x. Growthpoint retains strong liquidity, with R0.8bn in cash and R5.2bn in unutilised committed debt facilities and enjoys excellent access to funding at attractive margins. Increased finance costs in SA, stemming from higher average borrowings compared to HY24, were offset by a lower weighted average cost of debt in HY25 of 9.2% (HY24: 9.6%).

“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,” notes Sasse.

Strategic Priorities

Growthpoint has a diversified portfolio and defensive income streams. It successfully advanced the company’s strategic initiatives during the period aimed at improving the quality of its SA portfolio, including enhancing sustainability initiatives across its core assets toward the goal of carbon neutrality by 2050, and optimising its international investments.

Improving the quality of its directly held SA portfolio of logistics and industrial, office and retail properties, Growthpoint is focused on disposals, developments and targeted investments. Over the past decade, it has trimmed asset numbers in the portfolio by 28%, from 471 to 341, reducing gross lettable area by 14.7%, thereby improving the quality of its portfolio and income streams. In HY25, Growthpoint disposed of a dozen properties for R589.4m at a R7.4m profit to book value and invested R945.4m in development and capital expenditure.

As a result of its portfolio enhancement since FY15, Growthpoint has strategically grown its logistics and industrial assets from 15% to 20% of the total SA portfolio value while increasing its exposure to modern logistics warehouses and better performing nodes. It also reduced its office exposure to 40% from 46% of portfolio value, enhancing quality by selling B- and C-grade assets. Retail property assets stayed stable at 39% of the total portfolio value, even while disposing of assets that are below Growthpoint’s optimum size or in deteriorating central business districts. Growthpoint has invested in extensive redevelopments and upgrades at all its long-hold shopping centres.

Optimising its international investments, Growthpoint’s group-wide strategic and capital allocation review to simplify its business and focus on core assets resulted in it disposing of its entire shareholding in C&R to NewRiver REIT (NRR), effective 10 December 2024. The transaction proceeds of 62.5pps, split between 31.25pps (R1.16bn) cash and 31.25pps equivalent in NRR shares, resulted in Growthpoint taking a R1.22bn or 14.2% investment in NRR. Growthpoint used the cash proceeds to settle debt.

Growthpoint continues to evaluate all options to maximise the value of its investment in NRR as well as for its 29.6% investment in Globalworth Real Estate Investments (GWI), where Growthpoint continues to support management at a shareholder level with value unlock initiatives.

Its 63.7% investment in Growthpoint Properties Australia (GOZ) remains a core investment for Growthpoint.

Growthpoint owns 37.5% of Lango Real Estate Management Limited valued at R341.0m. Lango has however internalised its asset management function at an expense of USD60.3m and Growthpoint will receive preference shares equivalent to the value of its investment. In addition, Lango has been redomiciled to the UK. Growthpoint’s 15.8% investment in Lango UK is now classified as an international investment, and it is no longer included in Growthpoint Investment Partners (GIP).

South African Portfolio

In SA, Growthpoint owns and manages a R67.3bn diversified core portfolio of retail, office, logistics and industrial, and trading and development properties, representing 50.8% of Growthpoint’s total asset book value. This portfolio contributed 50.1% of DIPS.

The SA business enjoyed an improved contribution from all three sectors, including like-for-like rental growth, lower negative rent reversions, occupancy gains in the logistics and industrial portfolio and improved expense efficiencies and recoveries.

For the three sectors, gross property income increased by R98.0m, while expenses declined by R68.0m, driving a R166.0m or 6.2% uplift in net property income (NPI). Reduced loadshedding lowered expenses, especially in the office portfolio, and together with stringent cost management, decreased the SA business’s total expense ratio to 35.4% (HY24: 37.8%).

Comparing HY25 to HY24, the SA portfolio saw further occupancy gains, reducing vacancy rates from 9.2% to 8.3%, while rental renewal growth continued an encouraging trend, moving from -7.1% to -1.8%. The combination of higher occupancy and improving rental renewal growth propelled like-for-like NPI growth from negative 0.1% to an impressive positive 6.8%.

The overall improvement in property metrics was positive for SA property values, which increased 1.4% in the six months, driven by Growthpoint’s portfolio improvements and more favourable market conditions. Growthpoint’s Cape Town and KwaZulu-Natal portfolios are outperforming across all three sectors.

The SA logistics and industrial portfolio is well let, with a low vacancy rate of 3.5% (FY24: 5.2%). Its latest speculative developments at Phase 1 of Arterial Industrial Estate and Centralpoint in Samrand, where 9,541sqm was leased post reporting date, are now both fully let. Portfolio improvements and better overall sector dynamics saw like-for-like NPI grow 3.5% during the six months. Property valuations increased 1.5%. Renewal rental growth entered positive territory, lifting from -3.3% at FY24 to 0.9% over the six months.

Modern logistics properties make up around half of this portfolio’s gross lettable area, and this is increasing with new speculative developments such as the 21,831sqm Phase 2 of Arterial Industrial Estate. Two of the six units in this phase, where construction is nearing completion, are already let.

The SA retail property portfolio like-for-like NPI increased by 6.1% over the six months, reflecting improved overall portfolio quality, constant letting, a higher renewal growth rate and more effective recoveries for on-site solar electricity. The portfolio value increased by 1.4% during the period. Its core vacancy is a low 4.4% (FY24: 4.0%). Growthpoint’s shopping centres achieved strong trading density growth of 3.8% (FY24: 4.1%) and increasing shopper footfalls.

The key redevelopment of Bayside Mall was completed as planned. Growthpoint installed solar photovoltaic panels at seven shopping centres in the six months. Additionally, the R113m redevelopment and upgrade of Beacon Bay is on track for completion in June 2025. At Watercrest Mall, the introduction of a new Shoprite and relocation of Checkers is in progress. Growthpoint is actively exploring and finding solutions for stubborn retail vacancies, and, during the period, it agreed to sell Golden Acre and pivoted the retail mix at Northgate by introducing Shoprite as a new anchor to open in April 2025 and identified a portion of the mall for subdivision and sale. It successfully reduced vacancies at Brooklyn Mall and is contemplating various solutions for the remaining 9,300sqm of vacancy, which is mainly in the offices and two deep stores.

The SA office property portfolio continued to benefit from the sector’s recovery. Like-for-like NPI increased 9.4%, driven by consistent letting and an improved renewal growth rate, which moved up from -14.8% to -6.9% during the half year. Less loadshedding, efficient management of expenses and good recoveries were also positive factors. Stabilised portfolio vacancy levels stayed within the 15% range at 15.9% (FY24: 15.1%). Gauteng represents 72.1% of office portfolio GLA, which showed marginally decreased vacancies at 19.1% (FY24: 19.3%). The office portfolio printed a 1.3% increase in value.

Growthpoint completed the 154-room Canopy by Hilton hotel in its Longkloof mixed-use precinct in Cape Town, where it is also progressing the net-zero carbon redevelopment at 36 Hans Strydom for Ninety One under a 15-year lease for completion in July 2025.

Sustainability highlights achievedduring the period include Growthpoint’s Meadowbrook Estate facility for Serra becoming SA’s first industrial property to earn a prestigious 6-Star Green Star Existing Building Performance (EBP) rating from the Green Building Council South Africa (GBCSA), setting a new benchmark for logistics and industrial properties. The company’s installed solar capacity reached 52.46MWp (HY24: 40.7MWp), already exceeding its FY25 target of 50MWp, and its milestone Power Purchase Agreement (PPA) for 195GWh of renewable, green electricity will begin powering its revolutionary e-co2 solution at 10 Sandton office buildings in FY26, after nearly two years of innovation and preparation. The e-co2 scheme provides Growthpoint tenants access to wheeled renewable hydro, wind and solar electricity at cost-saving fixed escalations while reducing carbon emissions and generating tradeable carbon credits.

SA Trading & Development earned R48.9m (HY24: R20.3m) of trading profits and R5.4m (HY24: R4.0m) of NPI, but no development fees (HY24: R8.0m). Growthpoint’s in-house Trading & Development division develops assets for its own balance sheet as well as for third parties and GIP.

The V&A Waterfront

Growthpoint’s 50% interest in the V&A Waterfront in Cape Town has a property value of R12.4bn, which makes up 9.3% of Growthpoint’s total asset book value and contributed 15.8% to DIPS. Once again, the V&A delivered stellar returns, benefiting from increased tourism and retail activity. Like-for-like NPI rose 16.6% for the six months, with the precinct being fully let. It successfully opened the repurposed Union Castle Building in December 2024. Major projects remain on track, including the Table Bay Hotel’s conversion to the Intercontinental Table Bay Cape Town and the fully let luxury retail wing at Victoria Warf.

The V&A’s hotel, residential and leisure NPI increased by 37%. With the addition of The Commodore Hotel and The Portswood Hotel, the V&A now has three hotels (587 keys) operating under management agreements. Income from hospitality businesses, where the V&A enjoys both the rewards and risks of the operating business as opposed to pure rental, increased to 17% of operating profit earned, up from 10% in HY24.

Growthpoint Investment Partners

Growthpoint’s alternative real estate co-investment platform, GIP, is 1.9% of Growthpoint’s total asset book value and contributed 3.6% to DIPS. It now includes two funds distinct from Growthpoint’s core assets. They are Growthpoint Student Accommodation Holdings, operating under the Thrive Student Living brand, and Growthpoint Healthcare Property Holdings. GIP closed the period with R8.4bn of assets under management, split equally between SA healthcare and student accommodation.

International Investments

Growthpoint continues to optimise its international investment. On 31 December 2024, 37.9% of property assets by book value were located offshore, and 30.5% of its DIPS was generated offshore. Foreign currency income of R769.0m remained at a similar level toHY24.

GOZ, which invests in high-quality industrial and office properties in Australia, accounts for 23.8% of Growthpoint’s total assets by book value and contributed 21.2% to its HY25 DIPS. Despite increasing its payout ratio from 79.8% (HY24) to 95.2%, GOZ’s distribution decreased from AUD9.65cps (HY24) to AUD9.1cps. An additional AUD2.1cps was distributed to compensate for the increased dividend withholding tax, which nearly doubled from 9.8% (HY24) to 18.3%. Growthpoint received a R533.2m net distribution from GOZ (HY24: R551.2m).

GOZ maintained its strong balance sheet and reduced its gearing from 40.7% to 39.7%. The directly owned GOZ portfolio performed well, with occupancy remaining high at 94% (FY24: 95%) and a 6.0-year weighted average lease expiry. The period marked numerous strategic capital highlights for GOZ, including divesting its non-core holding in Dexus Industria REIT for AUD131.7m and establishing the AUD198 million Growthpoint Australia Logistics Partnership (GALP) with TPG Angelo Gordon holding 80%. GOZ also launched the Growthpoint Canberra Office Trust (GCOT), which acquired a AUD90 million high-yielding, primarily government-leased, A-Grade office building in Canberra’s CBD. As a result, GOZ’s funds management business enjoyed strong momentum over the six months.

GWI, which invests in offices and mixed-use precincts in Poland and in Romania where it also develops logistics parks, represents 11.3% of Growthpoint’s total assets by book value and a 5.1% contribution to DIPS. GWI’s dividend of EUR7.5cps (R129.1m) for HY25 was 31.8% down from 11.0cps (HY24: R146.1m), negatively impacted by higher interest rates on its Eurobond refinance, which is also expected to soften Growthpoint’s dividend income from this investment for the full year. GWI maintained a strong balance sheet with gearing at 38.1%.

GWI achieved like-for-like NPI growth of 7.0%, with portfolio vacancies reducing to 13.3% (FY24: 13.8%). Disposing its 50% share in the joint venture industrial portfolio was the main factor contributing to the 5.4% portfolio value decrease to EUR2.6bn. GWI continues to invest in its portfolio, including its current refurbishment of the 48,000sqm Renoma mixed-use property in Poland. It completed and leased 5,900sqm of the Craiova Logistics Hub in the period.

NRR, which invests in retail properties in the UK and which Growthpoint acquired as part of its C&R disposal, accounts for 0.9% of Growthpoint’s total assets by book value and with C&R contributed 3.8% to its HY24 DIPS. NRR declared a dividend of 3.0pps, translating to R38.8m for Growthpoint for the six months ended September 2024. In addition, R57.0m funds from operations from C&R to 10 December 2024 are included in the distributable income.

Lango, which invests in prime commercial real estate assets in key gateway cities across the African continent (excl. SA), accounts for 1.9% of Growthpoint’s total assets by book value and made a 0.4% contribution to DIPS. In HY25, Lango finalised the acquisition of USD200m of assets from Hyprop Investments Limited and Attacq Limited, and Growthpoint received R11.0m dividend income from Lango.

Looking Ahead

Growthpoint’s SA portfolio has stabilised, with key metrics improving across all three sectors.

“We continue to see positive momentum across the portfolio, underpinned by operational resilience and strategic execution. This is supported by the improved sentiment in the country under the Government of National Unity, along with the improving interest rate environment,” says Sasse.

Growthpoint aims to execute R2.8bn in strategic non-core SA asset sales for the full financial year, further improving the quality and sustainability of its property income, albeit at a lower overall quantum. Despite temporary closures in some areas due to major projects underway, the V&A Waterfront is on track for mid-single-digit growth for the full year. The reduction in finance costs will continue to benefit the business going forward.

On the international front, elevated capital costs, both domestically and globally, continue to constrain investment growth.

“As interest rates ease and economic conditions improve, we remain well-positioned to drive long-term value for our stakeholders,” concludes Sasse.

Vukile festive season trading update

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Vukile’s South African and Iberian retail property portfolios delivered impressive increases in performance in November and December 2024, signalling a successful Black Friday and holiday trading period.

SOUTH AFRICAN PORTFOLIO

The robust trade of our assets and the vibrant demand from both shoppers and retailers for our shopping centres, particularly in the township and rural markets, remains encouraging. These impressive trading figures bode well for income and valuation growth.

Turnover

Highlighting a positive trend in festive trading, the South African Portfolio achieved a strong 6.1% growth in trading density during the combined November and December 2024 period, compared to the same months in 2023. This continues the portfolio’s positive annualised trading density momentum, which was 2.4% in March 2024 and 4.2% in September 2024. To date, FY25 has continued to show improved and sustained growth as anticipated, driven by an improved macroeconomic environment, governmental reforms on electricity and pension funds, and continued positive sentiment following the formation of the government of national unity.

During the two-month period, Township shopping centres were the best performing portfolio segment with trading density growth of 9.6%. Rural and urban centres delivered trading density growth of 5.9% and 4.6%, respectively, further highlighting the strong festive shopping demand within the communities we serve.

Retail categories with the most significant turnover growth were Unisex Wear (+7.7%), Groceries (+7.2%), Fast Food (+6.3%) and Home Furnishing (+6.0%), which all recorded substantial, sustained growth. These increases demonstrate strategically sound category exposure particularly in the non-discretionary segments of the market.

Footfall

Shopper visits in November 2024 increased by 5% compared to November 2023, reflecting stronger Black Friday trade over the month. December 2024 footfall remained consistent with the same period last year.

IBERIAN PORTFOLIO (Castellana Properties)

 The trading activity within the portfolio during November and December 2024 underscores the robust growth outlook for Spain and Portugal, primarily fuelled by private consumption. The projections for 2025 remain pleasingly positive, buoyed by strong employment figures, healthy savings, and manageable inflation. These factors are likely to continue driving interest rate cuts, thereby enhancing consumer spending power.

Spain

Turnover

Sales rose by 4.9% in November 2024 compared to November 2023, with all retail segments experiencing growth. Notably, the Leisure sector jumped by 21.1%, Food & Beverage climbed by 12.2%, and Health & Beauty saw a 7.3% rise.

December sales rose by 4.8%, with Homeware leading at 9.4%, followed by Leisure at 7.8%, and Sports & Adventure at 5.6%.

Footfall

In Spain, shopper visits surged by 9.7% in November 2024 compared to the previous November, with a remarkable 17.0% increase during Black Friday Week. On Black Friday itself, Castellana’s Spanish shopping centres saw a 10.8% uptick in visits.

December 2024 footfall in the Spanish portfolio grew by 2.4% year-on-year, while the Christmas period (from 1 December 2024 to 6 January 2025) saw a 2.9% increase.

 Portugal

Turnover

November sales climbed by 8.5% year-on-year, with all categories showing improvement. Household & Furniture led with a 17.5% increase, Accessories rose by 12.9%, Electronics grew by 11%, and Fashion went up by 7.4%.

December sales increased by 2.8%. Leisure was the top performer with a 26.9% rise, followed by Household & Furniture at 15.1%, Accessories at 5.8%, and Fashion at 5.0%.

Footfall

In Portugal, footfall increased by 4.6% in November 2024 compared to the previous year and surged by 15.9% over Black Friday Week, with a noteworthy 21.2% rise on Black Friday. In December 2024, footfall in the Portuguese portfolio rose by 2.1% compared to December 2023.

TRANSACTIONS UPDATE:

EXCLUSIVE DISCUSSIONS TO ACQUIRE BONAIRE SHOPPING CENTRE

Castellana remains in exclusive discussions to acquire the largest shopping centre in Spain’s Valencia province, Bonaire Shopping Centre, from multinational retail REIT Unibail-Rodamco-Westfield. The transaction’s closing was extended due to the tragic 2024 floods in Spain. Unibail-Rodamco-Westfield is making good progress towards reinstating and reopening the centre, which is expected mid-February 2025.

DISPOSAL OF STAKE IN LAR ESPAÑA

On 27 December 2024, Castellana closed the sale of its 28.8% stake in Lar España, receiving proceeds of c. €200m after negotiating an improved cash offer of €8.30 per share, delivering a total profit of c. €108 million through a combination of dividends received (c. €38 million) and capital appreciation (c. €70 million) and an IRR of c. 45% per annum since January 2022 in ZAR terms.

Through the Lar España exit, Castellana has created an opportunity to recycle capital into other strategically aligned and financially accretive growth opportunities with attractive yields and with significantly lower operational and deal execution risk.

ALEGRO SINTRA ACQUISITION – 50/50 JV AGREEMENT WITH NHOOD/CEETRUS

Continuing its expansion into Portugal, on 19 December 2024 Castellana acquired 50% of Alegro Sintra shopping centre in Lisbon from Ceetrus, represented by their subsidiary Nhood, the real estate arm of ELO Group. This leading French retail conglomerate owns Auchan, Leroy Merlin, Decathlon, and Kiabi, among other brands. The 50% stake was priced at €46.5m.  The asset is valued at €180m, representing a first-year net initial yield of 8.00%.

Alegro Sintra is a dominant, highly successful shopping centre located in the north of Lisbon, a dense and growing residential node, with an annual footfall of 8.7 million visits and a total gross lettable area (GLA) of 58,000m2, including a top-performing Pingo Doce supermarket. The centre is well anchored by a complete fashion offering, including Inditex brands and Primark and a strong food court.

Castellana acquired 50% of the company that owns 42,255m2 of the shopping centre’s GLA, with the Pingo Doce supermarket being owner-occupied and excluded from the transaction. The shopping centre offers strong and growing income with opportunities to add value through strategic asset management initiatives together with our joint venture partners.

Through this joint venture Castellana is partnering with an institutional real estate business in Europe with strong synergies, both in terms of on-the-ground know-how and presence in Portugal, as well as access to further opportunities across Iberia and the rest of Europe.

Redefines’retail portfolio grows as trading conditions in SA improve

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Redefine Properties’ retail portfolio continues to deliver as trading conditions in South Africa improve

Johannesburg, 2 December 2024 – Redefine Properties (JSE: RDF), one of South Africa’s leading real-estate investment trusts (REIT), has noted an improvement in trading conditions in South Africa’s retail sector going into the 2024 holiday season. With positive trends in retail sales, rental renewal rates and visitor foot count, the momentum in the sector bodes well for South Africa’s future growth.

In August 2024, retail sales in South Africa increased year-on-year by 3.2%. This marked the sixth consecutive month of growth in retail activity and at a robust pace. Additionally, foot traffic in major shopping centres rose by 8.3% year-on-year during the second quarter of 2024, a positive trend that has continued since December 2021. The rent-to-turnover ratio, which is a measure of retailer’s cost of occupancy, is now at its best level in more than ten years.

Nashil Chotoki, Retail national asset manager at Redefine, attributed the growth in retail activity to non-discretionary spending, with food and value-focused retailers serving as the main industry drivers. “Within the Redefine portfolio, grocers contribute 64% of turnover growth. Therefore, a tenant mix of essential services and retailers aligned with value offerings that is relevant to the demographics of the catchment areas will be a key success factor for shopping centres. It is why Redefine will increase its exposure to this category to 40% of its GLA in the next financial year,” Chotoki explained. “Lower interest rates and improved consumer confidence will further drive retail sales growth into some of the discretionary retail categories, and, ensuring that the tenant mix of a shopping centre is aligned to this will create sustainable growth.”

These trends come on the heels of the release of Redefine’s annual results for the 2024 financial year (FY24). The REIT’s retail portfolio accounts for 45% of its South African property asset platform, with a carrying value of R28.3 billion (up from R24.6 billion in FY23). Redefine owns 59 retail properties nationwide, occupied by 2,807 tenants with an annual trading density of R34,700 per sqm. The portfolio’s rent-to-turnover ratio of 7.7% reflects sustainable revenue growth prospects across its retail formats.

Redefine also enjoys an active occupancy rate of 95%, which it expects to increase in FY25 due to healthy letting demand. Furthermore, with the help of tenant support programmes and data-driven insights, Redefine ensures tenants are placed in optimal macro-locations to enhance their trading performance. This has enabled Redefine to improve its rent reversion rate on renewal to 0.2% and achieve a renewal success rate of 88%. Our analysis goes way beyond shopper data and combines a variety of data to drive insights to make decisions that inform our strategy at an asset level.

“We have also found that upgrades to stores, particularly grocers, drive improvements in turnover through attracting new customers to shopping centres. That is why Redefine is working closely with national retailers to support this, culminating in 8,500 sqm worth of upgrades scheduled to commence in February 2025,” Chotoki added.

To further diversify income streams, Redefine has pursued alternative revenue opportunities through in-mall and exterior billboards, and electric vehicle charging infrastructure installed at eight sites. Sustainability remains a top priority, with solar photovoltaic plants generating 18% of the portfolio’s energy needs thanks to an installed capacity of 34,587 kWp. Expansion plans will add another 12,351 kWp in capacity.

“There are still challenges in our path, but what is certain is the resilience and promise that South Africa’s retail industry poses from both a consumer and business perspective. Through strategic planning and implementation, and by prioritising the needs of consumers and our tenants, we are fully tapping into the power of retail spaces as social and economic enablers,” Chotoki concluded.

Emira reports robust half-year results and reshapes its portfolio 

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Emira Property Fund (JSE: EMI) reported strategic delivery, diversification-enhancing acquisitions, active capital recycling, and strong operational and balance sheet metrics for its six-month interim period ended 30 September 2024. The company’s interim distributable income per share increased by 6.9%. It declared a 1.1% higher cash-backed interim dividend per share of 62.39c. Emira’s net asset value per share increased by 12.3% to 1,945.50cps during the six months, driven by rising property valuations and the fair value equity gain from Emira’s maiden investment in Poland.

Geoff Jennett, CEO of Emira Property Fund, attributes the positive performance to strengthening operational metrics, active asset recycling, and strategic deal-making, reflected in its reshaped portfolio. He adds that Emira is on track to deliver on its objectives for the full year, which it expects to result in marginally higher distributable income compared to that achieved for its past financial year.

Jennett reports, “Emira’s local portfolio outperformed, our US investments are comfortably on track, and we completed the first tranche of our investment into DL Invest, bolstering our diversification by tapping into Poland’s burgeoning economy with its unique growth drivers and opportunities.”

Emira invested €55,5 million for an initial effective 25% equity stake in DL Invest Group, a Luxembourg-headquartered property company developing logistics centres, mixed-use/office complexes and retail parks, valuing its assets at €730 million and NAV at €278 million pre-investment.

Emira has the option to expand its position in DL Invest Group by investing an additional €44,5 million, which will   increase its equity holding to 45%. This second tranche subscription option must be exercised by 31 January 2025 and requires shareholder approval to pursue. Castleview Property Fund, which holds around 58% of Emira’s issued shares, has given its irrevocable vote in favour of exercising the option, and shareholders can expect to receive a circular regarding the option.

DL Invest Group has a 17-year track record in Polish commercial real estate, with a €730 million portfolio focused mainly on logistics. Emira’s investment will fund DL Invest Group’s logistics development pipeline, aiming to create a €1 billion business. The partnership aligns with its co-investment strategy with in-country specialists. Emira will participate actively, with board representation, and has committed to an initial five to six-year investment term.

Funding for the first tranche of investment came from Emira’s balance sheet and recent disposals. Its non-core commercial and residential property sales transferred, completed and agreed upon during the period totalled R2.6bn. Emira’s strategic capital recycling strengthens liquidity by disposing of non-core assets that can be sold at fuller value. This creates capacity to invest in undervalued opportunities with stronger growth potential.

Emira’s balance sheet is healthy, with an adequate 2.3x interest cover ratio and a loan-to-value ratio that declined from 42.4% to 42.0% over the six months and is expected to decrease further as property disposals transfer and a portion of the proceeds are deployed to reduce debt. It reported unutilised debt facilities of R370m and cash on hand of R112.8m at half-year which will increase as proceeds from disposals are realised. Emira has a strong and diversified financial foundation, with support from all major South African banks and the proven ability to access the debt capital markets. In October, GCR affirmed its corporate long-term credit rating of A(ZA) and corporate short-term rating of A1(ZA), with a stable outlook.

The first tranche of its latest transaction has immediately increased Emira’s international investments to 26.8% of its portfolio — with 15.5% in the US and 11.3% in Poland — while 73% remains in South Africa, shifting it towards lower-risk, more attractive diversification with enhanced stability and appeal. The second tranche DL Invest Group option creates the potential for this to become nearly 37% offshore.

Emira is a real estate investment trust (REIT) with a diversified portfolio balanced to deliver stability and sustainability through different cycles. This risk-mitigating strategy includes a mix of domestic and international assets in direct holdings and indirect investments with specialist co-investors. Emira’s direct South African portfolio of 84 properties worth R12.1bn is diversified across commercial property sectors and residential rental property. Emira’s exposure to the United States is with US-based partner The Rainier Companies. Emira holds equity interests, with unanimous voting rights, in 12 dominant, value-oriented grocery-anchored power centres.

The local portfolio performed well, surpassing most key targets. SA commercial vacancies are already low and tightened to 3.9% from 4.1%. The portfolio saw an increase in like-for-like valuation of 4.7%, reflecting enhanced metrics across all three sectors and improved business sentiment. Residential occupancy remained strong at 96.7% and, similarly, maintained like-for-like valuation levels. Both sets of metrics signal a property portfolio that is attractive, competitive, adaptable and designed for lasting performance.

Emira’s commercial portfolio by value is split between urban retail (43%), office (25%) and industrial (15%) of the directly held SA portfolio. All sector vacancies are below the applicable benchmarks, and tenant retention increased from 81% to 83% by revenue during the period, reinforcing Emira’s effective leasing strategies. Its 15-property directly held retail portfolio of primarily grocery-anchored neighbourhood centres catering to their communities is trading well with improved metrics, including low vacancies of 4.2%. Despite the slump in office sector fundamentals, Emira’s portfolio of 20 mainly P- and A-grade office properties saw office vacancies improve into single-digit territory, from 10.9% to 9.4%. Emira’s diversified industrial portfolio of 28 properties enjoyed strong demand and delivered a sustained defensive performance at near full occupancy, with vacancies stable at 0.7%.

Residential rental assets comprise 21 properties, or 17% of Emira’s directly held SA portfolio by value, comprised of The Bolton in Rosebank, Johannesburg, and the 20 quality, affordable suburban units of Transcend Residential Property Fund, Emira’s wholly-owned specialist residential company. The portfolio of 3,588 units is split between Gauteng’s (90% by value) and Cape Town’s (10% by value) high-demand areas. The portfolio is achieving rental growth, with sustained demand for accommodation.

Overall, the commercial portfolio benefited from R119.8m in tactical upgrades, including various sustainability-driven initiatives, reconfigurations and refurbishments. Emira also invested R8.6m into its residential portfolio.

Emira collaborates with industry bodies to address South Africa’s deteriorating municipal infrastructure, which is a concern due to underinvestment. Inconsistent utility supply and rising costs hinder operational efficiency. To combat this, Emira is driving sustainability through fast-tracked solar power, water-saving initiatives, and backup systems. “We’re committed to energy-efficient buildings and are passionate about biodiversity. Our ESG strategy makes Emira properties the excellent choice for businesses,” notes Jennett.

Jennett points to easing inflation, declining interest rates, and growing political stability in South Africa, transforming the outlook for local real estate. “With costs stabilising for consumers and businesses alike, spending is set to rise, boosting property demand. More favourable interest rates should bolster investor confidence and reshape tenant demand patterns. Decreased loadshedding has further strengthened business confidence, prompting firms to invest in longer-term plans. Improved sentiment post-election bodes well for stronger long-term returns from the property sector, but short-term growth will be tempered as the market absorbs elevated vacancies and while economic headwinds subside. While it will take time for these positive factors to yield measurable results, they position Emira well to continue delivering strong returns to investors.”

Emira’s 12 equity investments in US grocery-anchored dominant value-oriented power centres total R2.56bn (USD147.1m). The US economy remains on a steady and stable growth trajectory, with GDP up 3% for Q2 2024 and 2.8% for Q3 2024 coupled with low unemployment, easing inflation and a 50bps cut to interest rates in September and another 25bps trim in November. While US elections introduced some uncertainty to the economy, stability should return with clarity of the new government’s priorities and policy. This environment continues to support Emira’s investment in US open-air centres focused on popular value and needs-based retail in robust markets.

Robustly resilient property fundamentals and high-quality tenants underpinned the US portfolio’s low vacancy rate of 3.5% and combined portfolio WALE of 4.5 years. It delivered a solid performance, adding R120.1m to Emira’s distributable income.

Jennett concludes, “Emira’s strategic pivot is in full swing as we target opportunities with robust growth potential tightly aligned with our long-term goals. These solid half-year results put us firmly on track for a marginal increase in distributable income for FY25, reinforcing Emira’s consistent record of reliable performance.”

Dipula shines with solid results, solar roll-out and strong prospects

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Dipula shines with solid results, solar roll-out and strong prospects

JOHANNESBURG, 13 November 2024 — Dipula Income Fund (JSE: DIB) has reported a solid set of results for its financial year to 31 August 2024, delivering strong operational, financial and strategic progress. Dipula’s property portfolio produced growth and increased by 4% in value to R10.2 billion, contributing to a 5% rise in net asset value.

Dipula is a prominent South Africa-invested REIT with a diversified portfolio of 165 retail, office, industrial and residential rental properties. Convenience, rural and township retail centres produce 65% of its defensively weighted portfolio income, and 60% of portfolio rental income is generated in Gauteng.

Izak Petersen, CEO of Dipula, comments, “South African trading conditions and consumer sentiment are improving post the July 2024 national elections. The new Government of National Unity has been well received, with parties committed to enhancing service delivery. Global and local interest rate cuts, easing inflation, and a stronger Rand also bode well for the economy. We anticipate these macroeconomic improvements will positively impact the property market in the short to medium term.”

Despite recent improvements, the 12 months to 31 August 2024 were challenging due to rising property costs and interest rates at their peak. “Notwithstanding the challenging operational and financial environment, Dipula delivered a good set of results,” adds Petersen.

Dipula’s revenue grew by 7% despite negative rental reversions in government-tenanted offices and lower income due to prior-year disposals. Net property income increased by 2%, under pressure from above-inflation municipal hikes that significantly increased property expenses, higher maintenance spending, and rising third-party contract labour costs. Net finance costs increased by 3%. Overall, prior disposals, bigger expenses and higher finance costs led to a decrease in distributable earnings per share of 4%. The declared dividends totalled 90% of distributable earnings.

Operational results were distinguished by high levels of active leasing. Dipula concluded leases worth R1.4 billion during the year, keeping its portfolio well occupied with longer leases. It achieved robust tenant retention, improved from 84% to 87%, with R1.2 billion of leasing representing renewals.

Retail vacancies improved from 7.5% to 6.4%. However, the overall portfolio vacancy rate was 7.5%, up from 6.0% in the previous year, primarily due to higher vacancies in the office and industrial sectors.

Dipula’s 83 retail properties offer well-located trading spaces and convenient access for shoppers. Each property is tailored to meet the specific needs of the local area, providing essential goods and services that resonate with the community. All tenant categories reported positive turnover growth, with health and beauty, restaurants and fast food, liquor, and hardware delivering the strongest growth. When tenants chose not to renew their leases during the year, Dipula secured replacement rentals at a 14% higher rate. The retail portfolio’s value increased by 8%.

Accounting for 16% of rental income, Dipula’s office spaces offer flexible, modern work environments that cater to the diverse needs of businesses in prime urban locations. While the office portfolio ended the year with a vacancy rate of 22%, Dipula anticipates a gradual recovery in line with recent sector improvements, supported by limited new development activity that will further support rising occupancy rates and healthy rental growth.

Dipula’s mid-sized industrial and logistics facilities in strategic locations represent 14% of its rental income. With a vacancy rate of just 3%, this strong, stable portfolio boasts the lowest vacancy across Dipula’s assets.

Its residential properties provide affordable, high-value housing in economically vibrant locations. This portfolio is 4% of rental income and recorded an average vacancy for the 2024 financial year of 6%.

Dipula’s commitment to tight cost control is evident in its improved administrative cost-to-income ratio, which reduced from 4.4% to 3.3%. While the overall cost-to-income ratio temporarily rose to 42.3% (2023: 39.5%), this increase was mainly driven by elevated property-related expenses and lower municipal cost recoveries. This is, however, expected to return to normal levels of around 40%.

Diligent asset management enables Dipula to reduce risk and improve its portfolio with various value-adding strategies. It invested R169 million in refurbishments and capital expenditure during the year. It also disposed of properties for R37 million, with proceeds funding value-enhancing revamps and the roll-out of renewable energy and backup power.

“We’re building a future-fit portfolio by investing in sustainable assets. This year, we rolled out the first phase of our solar photovoltaic programme, which is now live at nine of 10 sites. The project increases Dipula’s solar power capacity by 5.3 kWp, taking it from 1.6kWp to 7kWp – a number we plan to treble in the next 24 to 36 months. We also invested in waste and water management, community investment, staff training and wellness, and nurturing new talent through internships,” reports Petersen. Dipula’s sustainability strategy rests on a systematic process, pinpointing and tackling risks and opportunities that matter most to its business and stakeholders, guided by the UN’s Sustainable Development Goals.

Dipula’s prudent balance sheet management underpins its consistent, sustainable financial returns. It restructured its debt facilities from 1 March 2024 with a R3.8 billion syndication programme, extending its weighted average debt expiry period significantly from 1.9 years to 4.1 years. Dipula maintained debt levels comfortably above all covenant requirements, with a year-end gearing of 35.7%, an ICR of 2.7 times, and undrawn facilities of R80 million. Solid balance sheet metrics ensured Dipula‘s credit rating was affirmed at BBB+(ZA) and A2(ZA), respectively, with a stable outlook.

Looking ahead, the long negative cycle for South African real estate is showing signs of improving. Research highlights stronger leasing performance across office, retail, industrial and residential properties.

“As inflation eases and the power grid stabilises, we foresee rental growth and a slowdown in cost increases. This should bolster business and consumer confidence, potentially spurring economic investment and strengthening property fundamentals, despite navigating ongoing challenges presented by failing municipalities,” notes Petersen.

The company expects better performance from the 2025 financial year, having completed various capital projects. Dipula’s retail and industrial portfolios are poised to continue their robust performance, while the office sector is expected to experience a gradual recovery. High occupancy levels are anticipated for the affordable residential sector, with rental growth that at least keeps pace with inflation. Dipula expects distributable earnings growth of at least 5% for the year ahead.

“Dipula’s strategy prioritises capital allocation to energy sustainability, portfolio- and income-enhancing developments and elevating tenant quality. Discerning investment decisions, positive economic trends and focused management will drive improved performance and continue to deliver sustainable value for our stakeholders,” Petersen concludes.

Redefine Properties reports solid financial results for FY24

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Redefine Properties reports solid financial results for FY24: A pivotal turning point for the property sector

Johannesburg, 4 November 2024 – Redefine Properties (JSE:RDF) has reported solid improvements across its key operational metrics for the financial year ending August 31, 2024. This year has marked a crucial turning point for the property sector, as easing interest rates and increasing confidence are leading to better property fundamentals and a more favourable operating environment.

Andrew König, CEO of Redefine, stated that the decrease in political risk, along with a stable electricity supply, has boosted confidence. He noted, “Advancements in strategic reforms, such as Operation Vulindlela and the Government of National Unity’s emphasis on supporting local government as well as a commitment to achieving 3% economic growth, are all contributing to this increased confidence, which serves as a cost-effective form of economic stimulus. This, combined with falling interest rates, is helping to propel the property cycle upward.”

Redefine has focused on preparing for a potential recovery in the property cycle. The reported enhancements in operating metrics, though starting from a low baseline, are primarily the result of strategic initiatives. These include efforts to simplify the asset base, optimise capital by restructuring R27.7 billion in local debt, develop talent, and expand sustainability initiatives like the implementation of solar PV systems to meet energy needs.

Redefine’s COO, Leon Kok, noted that during the reporting period, most of the company’s South African operating metrics have either stabilised or improved. “In particular, occupancy rates increased to 93.2%, up from 93.0% in FY23, with noticeable enhancements across all sectors. Tenant retention, which has become more difficult due to heightened competition from excess supply, is nearing 90%. This is a strong result that reflects the quality of Redefine’s portfolio and the strength of our relationships with tenants, who are eager to renew long-term leases with us.”

He stated that Redefine’s retail portfolio continues to perform well, with occupancy rates for FY24 rising to 95.0% (FY23: 93.6%). “We anticipate further improvements in occupancy rates for FY25 due to positive sentiment and decreasing interest rates, which are expected to enhance consumer spending power.”

Redefine reported an overall improvement in renewal reversions, now at -5.9%, up from -6.7% in FY23, primarily driven by the retail and industrial sectors. While the office portfolio saw negative reversions of -13.9%, Kok explained that this was due to market rentals not keeping pace with underlying rental escalations. He anticipates stabilisation as market conditions improve.

However, occupancy in the office portfolio continues to benefit from Redefine’s exposure to P- and A-grade assets. The limited demand in the office market is increasingly focused on higher-quality properties, where Redefine holds a more competitive advantage.

Redefine’s industrial portfolio remains resilient, benefiting from long leases and quality tenants, with renewal reversions increasing by 5.5% during the period. Kok noted that this result reflects both the portfolio’s quality and the underlying activity supporting market rental growth. “Our strategy in this sector is bullish regarding capital allocation, as we have access to developable land in prime locations near key transport hubs, which should create a strong pipeline of leasing opportunities.”

Kok highlighted the increase in solar PV capacity as another positive result from FY24. During the year, Redefine added a further 8MW of solar capacity, with an additional 18MW currently underway. Once completed, this will bring the total installed capacity to over 60MW.

Solar PV accounts for 18% of the energy requirements for the South African retail portfolio, while Polish retail, logistics, and office sectors utilise 25%, 86%, and 100% green energy, respectively.

In Poland, EPP’s core portfolio has achieved an occupancy rate of 99.1% (FY23: 98.4%), with renewal reversions turning positive at 0.2% (FY23: -7.2%), which signals a return to market rental growth.

“The Polish economy is stabilising, and we are beginning to observe a rebound in retail spending growth due to moderating inflation and electricity costs returning to pre-energy crisis levels,” König explained. “Likewise, the logistics sector is performing well, supported by a market that favours infrastructure expansion, particularly in Western Europe and Germany.”

ELI, Redefine’s Polish logistics platform, has an occupancy rate of 93.4%, and the 62,601 sqm of developments completed during the period are fully occupied.

Redefine’s self-storage operations in that market are also growing, following the acquisition of TopBox. Along with seven new developments being considered, this could potentially increase the net lettable area by an additional 33 277 sqm.

Redefine CFO Ntobeko Nyawo said that from a financial standpoint, Redefine’s balance sheet remains strong. “We achieved distributable income per share of 50.02 cents, in line with our market guidance. Net operating income in our South African portfolio grew by 5.2% to R4.967 billion, demonstrating our ability to maintain profitability amidst challenging conditions.”

The EPP core portfolio delivered net property income of R1.3 billion, which is an improvement on last year’s R1.2 billion, and was largely driven by rental indexation and increased occupancy levels. The cash distributions from the joint ventures also increased to R612.4 million compared with R334.3 million in FY23.

“We have acknowledged concerns regarding the complexity and high leverage of our joint ventures. To address these issues, we have developed a comprehensive plan and programme that will be implemented over time. Although this is not an immediate process, we have a medium-term strategy designed to tackle the challenges associated with these joint ventures, including necessary corporate actions. We are also pleased to report that institutional investment is returning to the Polish market, which supports the launch of our action plan.”

Nyawo said that the solid operational results were offset by the net finance charges increasing by 15.1% to R2.1 billion. “However, if we look at the quality of our earnings, it is pleasing that 95.8% of FY24 distributable income is recurring in nature; demonstrating the business’ ability to generate sustainable earnings in a tough operating environment.”

Nyawo stated that a major priority this year has been developing an efficient funding model to support the growth ambitions of the property platform. During the period, Redefine achieved a significant milestone with its innovative R27.7 billion common debt-security structure, which is anticipated to enhance competition among funders.

“The substantial refinancing completed in FY24 has resulted in a very low-risk debt maturity profile for us. In FY25 and FY26, no more than 10% of our group debt will be maturing, and with access to liquidity of R4.8 billion, our business is able to absorb headwinds and cease opportunities as they arise.”

He noted that the SA REIT’s loan-to-value ratio for FY24 stood at 42.3%, slightly exceeding the target range of 38% to 41%. The acquisition of the Mall of the South contributed 1.1% to this figure, which Redefine had previously communicated to the market. There are plans in place to reduce this ratio within the target range over the medium term.

“Finally, we are pleased to report that our distribution results include a payout of 22.2 cents for the second half, bringing our FY24 payout ratio to 85%. This is within our established dividend payout range of between 80-90%.”

Looking ahead, König said that Redefine is optimistic about FY25, with expectations for distributable income per share to range between 50-53 cents. “We are aware of the geopolitical risks that could disrupt inflation trends and monetary easing. Therefore, we are committed to improving our business performance by enhancing operational efficiency, restructuring our debt, and further simplifying our asset base. This approach will enable us to achieve risk-adjusted returns throughout market cycles. We are transitioning from merely identifying opportunities to actively capitalising on them, building on the progress we’ve made over the past year and focusing on the opportunities we identified in FY24.”

He added that much of the recent improvement in Redefine’s share price can be attributed to macroeconomic factors, such as increased confidence and the downward shift in interest rates. “Moving forward, we need to reinforce this improvement with operational results that support our share price. Our strategy emphasises organic growth, and as our share price approaches a level where the forward yield aligns with our debt pricing, we can reassess the overall debt-equity balance. Additionally, we will offer a dividend reinvestment plan, which seeks to conserve cash for the company and give investors the opportunity to cost effectively reinvest in Redefine’s compelling investment proposition.”

 

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