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Emira pre-close operational update ended 30 September 2024

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Shareholders and noteholders are referred to the Fund’s half-year results announcement for the six months ended 30 September 2024 (“interim results”), released on SENS on 13 November 2024. The Company wishes to provide an update to investors regarding the operational performance of its investments.

SA Direct local portfolio

Commercial portfolio

Despite a challenging economic environment, the local commercial portfolio, consisting of retail, industrial, and office properties, has delivered a resilient performance, meeting expectations for the 10 months ended 31 January 2025 (“the period”). Total vacancies across the portfolio increased to 6,8% (by GLA) at the end of January 2025 (September 2024: 3,9%). The increase was primarily due to RTT at RTT Acsa Park reducing their space from 46 673m² to 30 833m² and the impact of disposals over the period. Tenant retention remains a key focus, with 77.5% (by Gross rental) of matured leases being retained. The weighted average total reversions for the period have improved at an overall -4,2% (September 2024: -6,8%).

The Fund’s weighted average lease expiry (“WALE”) at the end of the period remained stable at 2,8 years (September 2024: 2,8 years), while average annual lease escalations remained similar at 6,4% (September 2024: 6,5%).

Collections vs billings for the period were 97.5%

During the period, 26 properties were transferred out of the Fund, generating total gross proceeds of R2.4 billion. These disposals comprised 5 retail properties, 10 office buildings, and 11 industrial parks.

Emira’s experience on the key individual sectors is as follows:

Retail:

Retail vacancies at the end of the period increased slightly to 4,4% (September 2024: 4,2%). The WALE is similar at 3,1 years (September 2024: 3,2 years) and 81,9% (by gross rental) of maturing leases in the period were retained. Total weighted average reversions for the period have improved to -0.9% (September 2024: -4,0%).

Emira’s retail portfolio of 12 properties consist mainly of grocer-anchored neighbourhood and community shopping centres, the largest being Wonderpark, a 91 038m² dominant regional shopping centre located in Karen Park, Pretoria North.

Office:

Office vacancies at the end of the period increased to 9,7% (September 2024: 9,4%). The WALE has improved slightly to 2,6 years (September 2024: 2,5 years) and 57,0% (by gross rental) of maturing leases in the period were retained. Total weighted average reversions for the period have improved to -5,8% (September 2024: -9,6%).

Emira’s office portfolio consists of 10 properties, the majority of which are P- and A-grade properties. The sector’s fundamentals remain depressed, with low demand continuing to limit real rental growth.

Industrial:

Industrial vacancies at the end of the period increased to 7,8% (September 2024: 0,7%) due to RTT at RTT Acsa Park reducing their space requirements. The WALE has decreased to 2,7 years (September 2024: 2,9 years) and 73,2% (by gross rental) of maturing leases in the period were retained. Total weighted average reversions for the period have declined to – 10,8% (September 2024: -7,9%).

Emira’s 21 industrial properties are split between single-tenant light industrial and warehouse facilities and multi-tenant midi- and mini-unit industrial parks.

Residential portfolio

The residential portfolio consists of 3 389 units (September 2024: 3 588) located in Gauteng and Cape Town.

Vacancies across the residential portfolio were 4.0% (by units) as at 31 January 2025 (September 2024: 5,0%), which was higher due to the held-for-sale units, and if these held for sale units are excluded, the vacancies were 2,9%.

Collections vs billings for the period under review were 98,4%.

In line with the Fund’s recycling strategy 386 residential units have transferred during the period, realising gross disposal proceeds of R312,9m.

USA

The US portfolio now comprises 11 equity investments, down from 12 in September 2024, in grocery anchored, value orientated, open air power centres. During the period, Emira and its co-investors successfully completed the sale of San Antonio Crossing, realising gross proceeds of USD28,2m (an 8.87% premium to book value) upon transfer on 18 December 2024. Emira held a 49,50% equity stake in San Antonio Crossing.

As at 31 January 2025, vacancies across the remaining 11 properties had increased to 3,9% (September 2024: 3,5%), mainly due to the bankruptcy of Conn’s (40 120 SF), the home goods retailer at Wheatland Towne Centre. The underlying properties are performing in line with expectations.

DL Invest Group S.A (“DL Invest”)

DL Invest is a Luxembourg-headquartered Polish property company. Through its subsidiaries (collectively the “DL Group”), it develops and holds logistics centres, mixed use/office centres, and retail parks across Poland. Through its internal structure, which includes approximately 230 employees, the DL Group’s business model assumes full implementation of the investment process and actively manages projects as a long-term owner.

Following shareholder approval at the general meeting on 17 March 2025, Emira exercised its Tranche 2 Subscription Option, and on 20 March 2025 subscribed for an additional 113 new B Shares and 113 9% Loan Notes, with each Loan Note linked to a B Share to form a Linked Unit (the “Tranche 2 Subscription”). This increased Emira’s stake to 45% of the total DL Invest shares. The total consideration for the Tranche 2 Subscription was €44.5m, comprising €8.9m for the B Share subscription and €35.6m for the Loan Notes. The Tranche 2 Subscription was funded through a new 5-year Euro debt facility, with a fixed interest rate of 4,71%.

As at 31 December 2024, the DL Group holds a portfolio of 38 properties (excluding land and properties under development) with an estimated value of approximately €670m. This portfolio consists of logistics/industrial properties (67% by value), retail properties (11% by value), and mixed- use properties (22% by value). Additionally, as of the same date, the DL Group owned land and properties under development with a combined carrying value of €182m.

As at the 31 December 2024, total vacancies across the DL Invest portfolio increased to 3,2% (September 2024: 2,0%), while the WALE remained at 5,5 years.

Capital management and liquidity

As at 28 February 2025 the Fund had unutilised debt facilities of R1,09b together with cash-on-hand of R349,2m. This was bolstered in March 2025 by a new 5 year €45m term debt facility from Rand Merchant Bank to fund the DL Invest Tranche 2 Subscription.

The Fund’s loan-to value ratio (“LTV”) decreased to circa 34,1% as at 28 February 2025 (September 2024: 42,0%) because of disposal proceeds received on properties that transferred post 30 September 2024 being used to reduce debt. Following the DL Invest Tranche 2 Subscription the LTV has increased and is expected to close at c. 36% – 37% by 31 March 2025.

Conclusion

The Fund is on track to exceed its objectives for FY25.

Emira expects to release its results for the full year ended 31 March 2025 on Wednesday, 28 May 2025.

The power of co-ownership in international real estate investment

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THOUGHT LEADERSHIP: by Geoff Jennett, CEO of Emira Property Fund

We have long recognised the immense value of collaboration at Emira Property Fund. The real estate industry is traditionally dominated by sole-ownership-centric strategies, but we believe that co-ownership offers a smarter, more risk-adjusted approach to international investing. Our offshore investment journey — first into the United States and then into Poland — has reinforced this belief.

Co-ownership is not merely about shared ownership; it is about shared expertise, shared risk, and shared opportunity. It allows us to leverage the strengths of our partners, navigate local market complexities, protect against the downside and execute deals more effectively than if we were operating alone.

Learning from our US experience

Our entry into the U.S. market was not only a successful investment but an insightful exercise in understanding the true benefits of co-ownership. While practical challenges such as time differences and travel logistics exist when operating in this market, these are minor compared to the strategic advantages we gained.

Had we pursued a direct ownership model, we would have faced significant hurdles, particularly in acquiring quality centres and then the negotiations with funders and major national tenants. The reality is, when a local business leader with long-standing relationships in the market picks up the phone, doors open more readily than they would for an unfamiliar South African investor. Our partners in the U.S. brought these critical relationships to the table, ensuring greater access to opportunities, more effective negotiations and superior deal-making outcomes.

Some may argue that establishing an in-country team could achieve the same effect. However, in an incremental investment strategy like Emira has for our US investments, building such a team too early is costly and inefficient. Rather than assembling a high-salaried team for a relatively small initial portfolio, we opted to partner with an established expert, ensuring cost efficiency, immediate market penetration, and lower initial risk exposure.

Expanding the model to Poland

Having seen the tangible benefits of this strategy in the U.S., we confidently scaled our co-ownership approach in Poland. However, this was not simply a replication of our U.S. strategy; rather, it was an evolution of it.

The Polish opportunity was fundamentally different: rather than acquiring individual assets one by one with in-country partners, we took a stake in an existing company with a substantial portfolio of 37 developed assets. This gave us immediate scale, access to an established management team, and deep-rooted local expertise — all without the lengthy and costly process of building a presence from scratch.

Moreover, Poland presented unique challenges: language barriers, unfamiliar banking relationships, and a tenant landscape we were not well-versed in. Here again, co-ownership proved invaluable. Our partners in Poland have naturally mastered these intricacies, enabling us to function as experienced market players from day one.

The true meaning of collaboration

Many assume collaboration is about working together harmoniously, but in reality, it is about working effectively, even when differences exist. In co-ownership, partners will not always be perfectly aligned in approach, style, or execution. What matters is a shared commitment to the outcome and a structure that enforces true partnership.

At Emira, we firmly believe that for collaboration to be effective, all partners must have genuine skin in the game. This means sharing the risks and rewards equitably. Our structures ensure that if we profit, our partners profit; if we lose, they lose too. This balance creates a powerful incentive for all parties to make sound, strategic and long-term decisions.

Our model is not just theoretical—it is structured into our investments. Our co-ownership agreements ensure that our partners assume at least the same or greater degree of risk as we do. Their commitment is real, tangible, and embedded into the deal structure.

The risk-adjusted return advantage

Beyond the strategic benefits, co-ownership also enhances our risk-adjusted returns. We do not need to take on 100% of an asset’s risk to benefit from its potential upside.

For instance, in the US, our joint ownership of open-air power centres allows us to access non-recourse debt over each asset at favourable interest rates—terms that would have been far less attractive if we had entered as a standalone South African investor. Our partners’ established credibility in the market played a crucial role in securing these financial advantages.

Similarly, in Poland, rather than attempting to outmanoeuvre local specialists, we leveraged their expertise to secure a profitable position in an already successful business. This ensured that our entry was strategic, measured, and positioned for growing success.

The bigger picture: co-ownership as a competitive edge

Some sceptics have questioned why South African funds risk offshore opportunities rather than focusing exclusively on domestic investments. For Emira, the answer is simple: We are not attempting to outsmart investors native to foreign markets — we are partnering with them.

By aligning ourselves with on-the-ground specialists, we are not only reducing risk but also improving our access to deals, market knowledge, and operational efficiency. Rather than adopting a rigid, one-size-fits-all investment approach, we tailor each deal to the opportunity at hand.

 The strategic advantage

Co-ownership is not about compromise; it is about optimisation. It is about recognising that success in global markets requires humility—acknowledging that local expertise is an invaluable asset and that working collaboratively yields superior results.

At Emira, we take pride in our collaborative mindset — not just in our international investments but also in our domestic market. Our partnerships investing in Enyuka, Transcend, and The Bolton office-to-residential conversion are just a few examples of how we have successfully embraced co-ownership.

As we continue expanding our international footprint in the US and Poland, our co-ownership model will remain a cornerstone of our strategy. It reduces risk, enhances returns, and unlocks greater expertise. Doing business this way is also more enjoyable. When like-minded people who are committed to the upside, yet all face the downside consequences, gather around the table, you arrive at better solutions. It makes the journey not just more successful but also more rewarding and fun.

The real estate industry is full of players determined to control every aspect of their investments. At Emira, we believe in a different approach. We do not need to own everything outright to achieve success; we need to own the right pieces, in the right way, with the right partners.

And that, we have found, makes all the difference.

 

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.

Redefine navigates uncertainty with focus on organic growth

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Redefine Properties (JSE: RDF) announced in its pre-close investor update for the half-year ending 28 February 2025 that its earnings outlook has stabilised despite a challenging operating context, driven by a focus on efficiency and strong demand for quality assets.

The company reported that its South African portfolio achieved a net operating profit margin of 77.8%, while EPP, its directly owned Polish retail property platform, improved its margin from 66.4% to 71.7%. This led to a consolidated group net operating profit margin of 75.9%.

Redefine CEO Andrew König highlighted that the global path to economic normalisation has been disrupted by changes in US policy under President Donald Trump, which introduced uncertainty around interest rates and inflation. “The stage is now set for a shallow easing cycle, and rates may not reach the levels we previously expected. While European interest rates continue to trend downward, escalating geoeconomic tensions cloud the 2025 outlook. To sustain growth in valuations, we cannot rely solely on interest rate movements. Our strategic focus remains on organic income growth, as this will drive value creation in the current market.”

Looking ahead, Redefine’s strategy is focused on disciplined capital allocation, the sale of non-core assets to reduce its loan-to-value ratio, restructuring joint ventures to enhance visibility of income streams, whilst delivering income growth. König noted that commercial real estate transactional activity is on the rise, which will support the company’s plans to offload non-core assets, with growing interest in the market.

Despite the disruption caused by the delayed national budget speech, König pointed to two promising initiatives from the National Treasury: efforts to remove South Africa from the greylist by October and the restoration of the country’s investment-grade credit rating. “This is critical for our business, as Redefine’s Moody’s rating was downgraded alongside South Africa’s. A reversal of this could improve access to international debt markets, and the delayed budget may even help with these efforts.”

 Green shoots in the SA portfolio

 Redefine’s South African portfolio has demonstrated solid performance, particularly in the industrial and retail sectors, which drove a 1% increase in overall occupancy since August 2024. Additionally, 80% of renewals were completed at stable or increased rental terms, a positive indicator of growth.

The industrial sector has proven especially resilient, with occupancy rising to 97.6%, alongside positive rental reversions in a competitive market. “The industrial sector continues to be one of our strongest performers, and we see potential for further growth if capital availability allows us to expand,” said Leon Kok, Redefine’s COO.

Conversely, the office sector remains challenged by excess supply and limited demand, except in select nodes. A significant lease renewal resulted in a -17% renewal reversion during the period. However, Redefine mitigated this impact through strong leasing activity in other locations, such as the Western Cape and Sandton, which benefit from proximity to the Gautrain. “Demand is focused on high-quality assets, and our active asset management ensures our portfolio remains well-positioned to attract this limited demand,” Kok added.

Sustainability commitments

 Redefine is making notable strides towards its sustainability goals, with an ambition to become the most sustainable property company by 2030. The company plans to expand its renewable energy capacity by 47%, with an anticipated 17% of energy consumption coming from renewable sources by year-end. Additionally, Redefine has achieved a 38% reduction in greenhouse gas emissions across its European portfolio, further solidifying its commitment to environmental sustainability.

The company also received recognition from Sustainalytics, earning three badges, including being ranked the 16th most sustainable global real estate company, the only South African REIT to place among the top 50 worldwide.

Growth in Poland

 While South Africa faces ongoing challenges, Poland’s economic growth has benefited from European interest rate cuts and social grants that have boosted household spending and retail conditions. EPP’s core properties have seen impressive occupancy levels of 99.3%, with rental reversions rising from 0.2% to 1.5%. The rent-to-sales ratio remains well below 9%, indicating healthy tenant affordability.

Redefine is pursuing a strategy of selling non-core assets and restructuring joint ventures in Poland to reduce complexity and lower the see-through LTV. “We are exploring options to simplify our joint ventures to either exit or fully own them,” König explained.

 Strong cash generation

 Redefine’s financial position remains strong, with a liquidity profile of R6.4 billion as of November 2024. The company has also proactively managed its debt profile, including the FY25 maturities that are progressing well on the back of improved liquidity levels in the capital markets. As of February 2025, Redefine’s weighted average cost of debt decreased to 7.2%, providing some relief amid global inflationary pressures.

Ntobeko Nyawo, Redefine’s CFO, emphasised, “Our focus continues to be on generating organic growth from our existing portfolio, maintaining a strong balance sheet, and weathering the current economic cycle. We are positioning the company to capture opportunities in high-quality assets, while ensuring strong cash generation to support our dividend payouts.”

Looking ahead: Living the upside

Redefine enters 2025 with a focus on “living the upside,” aiming for sustainable, long-term value creation. König concluded, “While some macroeconomic factors, including US policy shifts, remain unpredictable, we are confident in our ability to create our own upside and deliver on our strategic goals.”

Despite macroeconomic challenges, the company is maintaining its earnings guidance for FY25, with distributable income per share expected to be between 50 and 53 cents.

 

 

 

SA REIT Association expects steady sector growth in 2025

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The South African Real Estate Investment Trust (REIT) sector is poised for growth in 2025 driven by improving investor sentiment and property fundamentals, rising consumer confidence and falling interest rates.

According to the SA REIT Association December and January Chart Books, the sector is expected to deliver strong income returns of c.8%-9%.

Itumeleng Mothibeli, Chairperson of the SA REIT Research Committee and Managing Director of Vukile Property Fund Southern Africa commented:

“With the economic recovery, lower interest rates and robust demand for commercial property—particularly in the retail,  industrial and logistics sectors – we anticipate growth in the REIT sector this year. Our members are consistently reporting improvements in property fundamentals and the quality of earnings.”

“Township, urban and rural malls will continue to show resilience, while demand for logistics and warehousing space will remain strong. In the office sector, vacancies are falling as demand increases for smaller, high-quality spaces with features like co-working spaces, wellness facilities and smart technology are a draw card for tenants.”

Mothibeli said the defensive qualities of South African REITs such as their inflation protection, mandatory income distributions, liquidity and diversification advantages make them essential for building resilient portfolios. The predictability of real estate leases and rental income gives REITs a defensive edge, enabling more accurate earnings forecasts and lower share price volatility. REIT dividends are known to hedge against inflation, as asset values and rental rates often rise ahead of inflation.

“The cumulative 75-basis point interest rate cut will support sector growth, reduce borrowing and debt repayment costs for REITs, increase property values and returns for investors and boost distributions,” said Mothibeli.  

Despite the economy’s prolonged stagnation in 2024, Nedbank forecasts modest growth of 1.4% in 2025 and 1.8% in 2026. However, the bank expects fewer interest rates this year.

Nicky Weimar, Nedbank Group Economist commented: “Growth will be driven mainly by firmer consumer spending, supported by rising real incomes, subdued inflation, modestly lower interest rates and the withdrawals of contractional savings through the two-pot retirement fund system.

“Commercial property mortgages are recovering while home loans continue to slow. Nedbank expected both the commercial and residential property markets to improve moderately as the year progresses.”

Weimar stressed that the rapidly changing global landscape would probably deliver stickier global inflation and fewer US interest rate cuts, pointing to high-for-longer risk-free rates and continued US dollar strength. Against this backdrop, the South African Reserve Bank is likely to remain cautious.

Given upside risks to the local inflation outlook from a vulnerable rand, elevated US interest rates and the threat of global trade war, the current rate-cutting cycle is likely to be shallow. Nedbank forecasts only one more rate cut of 25 basis points in July. Consequently, monetary policy easing is unlikely to provide a significant boost to the property market. Instead, moderately faster economic growth in response to easing structural constraints and stronger consumer demand will support a reasonable recovery in the property market, said Weimar.

Gary Garrett, Managing Executive of Property Finance at Nedbank CIB commented: “We saw a significant increase in activity in the sector in the second half of 2024 which we attribute to the stability created by the Government of National Unity (GNU) as well as real evidence of interest rate cuts. We believe that this momentum will continue in 2025 should current economic conditions hold.”

The listed property sector outperformed other asset classes, including equities and bonds in 2024, further highlighting the positive sentiment and investor confidence in the sector, Garrett added.

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