JSE-listed Growthpoint Properties says in a trading update for the nine months to March 31 that it remains focused on its two core strategies, namely, improving quality through targeted disposals and investment in the South African portfolio; and optimising international investments through capital allocation to its core investments and rotating away from noncore ones in its international portfolio.

For the former, the group set an asset disposal target of R2.8-billion for the year ending June 30, focused on reducing its exposure to the office sector, particularly B- and C-grade offices, disposing of older industrial and manufacturing assets and exiting noncore retail properties in deteriorating central business districts (CBDs), as well as smaller retail and specialised assets such as motor dealerships.

For the full year, it has also targeted an investment of about R2.2-billion in its core portfolio, excluding Growthpoint Investment Partners (GIP), to preserve and enhance value through active asset management.

It is also focussing on increased investments in the Western Cape, particularly in the logistics and retail sectors.

Growthpoint says it continues to grow assets under management (AUM) and generate diversified returns through GIP and its Trading & Development (T&D) business unit.

The V&A Waterfront is predicted to achieve significant growth in the next three to five years and the group continues to evaluate long-term sustainable solutions to its ongoing capital requirements.

For the latter, Growthpoint says it remains committed to enhancing its core investment in Growthpoint Properties Australia (GOZ), primarily through supporting its capital-light strategy and, accordingly, supports management’s plans to grow the Growthpoint Australia Logistics Partnership, with the purchase of a A$40-million asset in Stapylton, Queensland.

At Globalworth Real Estate Investments (GWI), the group supports management’s value unlock initiatives.

It is expecting a decrease in dividend income for the full year owing to the significant increase in their cost of debt resulting from their bond re-finance in May 2024.

Growthpoint disposed of its noncore investment in Capital and Regional (C&R) to NewRiver Reit (NRR) for R2.4-billion on December 10, 2024, settled by R1.2-billion of cash and newly issued NRR shares worth R1.2-billion, representing 14.2% in NRR.

The cash proceeds were used to settle rand debt.

NRR published its preliminary unaudited results for the year ended March 31 on June 3, showing that it delivered a strong performance, underpinned by the successful acquisition of C&R and solid operational execution.

NRR declared a final dividend relating to the second half of the financial year of 3.5p apiece.

Growthpoint says it continues to evaluate all options to maximise the value of its investment in GWI and NRR.

Growthpoint further highlights that its capital management is disciplined with targeted capital and development expenditure funded through cash retained from the 17.5% dividend retention ratio and proceeds from disposals.

While its targeted disposal strategy continues on track, transfers of disposed properties are taking longer than expected owing to delays in obtaining Competition Commission approvals, rates clearance certificates and registration at the Deeds Office.

The group sold and transferred 15 noncore assets for R1.1-billion, at a total discount of R29.6-million to book value.

An additional R445-million has been transferred since April 1, while assets worth R1.2-billion are still awaiting transfer, of which R783.2-million is expected to transfer by June 30, bringing anticipated disposals for the year to R2.3-billion, R500-million less than its R2.8-billion target.

Growthpoint incurred R1.2-billion of development and capital expenditure for the South Africa portfolio during the period.

SOUTH AFRICAN PORTFOLIO
Growthpoint says its property key performance indicators (KPIs) continue to show pleasing improvements across all three sectors. Vacancies improved from 8.7% at full year 2024 to 8.4%, slightly above the 8.3% recorded at the half-year.

The marginal increase in this quarter is largely owing to the addition of 18 768 m² of vacancy from the newly completed speculative development, Arterial Industrial Park Phase 2, in Cape Town.

During this reporting period a total of 775 095 m² of space was let, comprising 434 945 m² of renewals and 340 15 0m² of new lets.

Renewal rental growth rates improved meaningfully across all sectors, reducing from -6% at full year 2024 to -1.8% at half-year, and now standing at -1%.

However, the group’s lease renewal success rate declined from 76.3% at full year 2024 to 68.8% at half-year and currently stands at 67.4%.

The weighted average lease term on renewals remained steady at 3.6 years, unchanged from half-year but slightly lower than the 3.7 years achieved at full year 2024.

Rental escalations for renewals were also stable at 6.9%.

Total nominal South African debt reduced from R40.2-billion at half-year to R39.1-billion, primarily driven by the settlement of the R240-million GRT25G-listed bond, a $20-million International Finance Corporation loan repayment, as well as the repayment of R500-million in previously used facilities.

This reduction was partially offset by the depreciation of the rand against the euro and the dollar. Notably, no new debt was issued during the period.

The weighted average term of the group’s liabilities decreased slightly to 3.5 years.

All three of the group’s domestic portfolios showed improved performance, Growthpoint highlights.

It points out that it has a strong set of initiatives, both innovative and established, in place to keep improving the quality of the portfolios and underlying operational metrics.

GIP is performing as expected. The V&A continues to exceed expectations, supported by the benefits of increased tourism and consistently effective asset management, Growthpoint highlights.

The group’s international investments are expected to continue performing in line with guidance.

At half year 2025, Growthpoint reported growth of 3.9%, compared to the initial full-year guidance of a decrease in distributable income per share (DIPS) of 2% to 5%.

Accordingly, on March 12, it updated full-year guidance to DIPS growth of 1% to 3%.

Growthpoint has also provided a further update to full year 2025 guidance to DIPS growth of 2% to 3%, from a previously revised growth estimate, primarily driven by improved performance and strengthening property fundamentals in South Africa, including continued outperformance by the V&A Waterfront, and lower interest rates, partially offset by lower offshore income owing to the sale of C&R.

Growthpoint will release its full-year results for the year ending June 30 on September 10.