JSE-listed real estate investment trust (Reit) Growthpoint Properties has reported that its results for the financial year ended June 30 have exceeded the top-end of its guidance with distributable income per share (DIPS) of 146.3c, up 3.1% year-on-year, and a total dividend per share (DPS) of 124.3c, an increase of 6.1%.

In a media release, Growthpoint said its return to growth came a full year earlier than initially expected.

The company noted that it entered the 2025 financial year forecasting an earnings contraction of 2% to 5%.

Better-than-expected half-year results, driven mainly by improved performance from the South African portfolio, better finance cost expectations and outperformance from the V&A Waterfront, in Cape Town, marked a turnaround.

Growthpoint has, therefore, upgraded its guidance to growth of between 1% and 3%. A further upgrade in June tightened the guidance range at the upper end of between 2% and 3%.

The same factors contributing to Growthpoint’s half-year outperformance cemented its positive performance in the second half.

“This strong set of results shows that Growthpoint has done well to exceed expectations and deliver solid earnings growth while executing our strategic priorities. The progress made in further strengthening our South African portfolio is evident in its improved performance,” said group CEO Norbert Sasse in the release.

The company noted that the watershed year also resulted in Growthpoint upgrading its payout ratio to 87.5% for the second half. Together with the 82.5% payout ratio for the first half, Growthpoint’s payout ratio for the full year was 85%.

Shifting its outlook from cautious to optimistic, Growthpoint said it would maintain its payout ratio at 87.5% for the 2026 financial year.

The company noted that the reset to the higher payout ratio reflected its strong balance sheet, effective strategy execution and disciplined capital management, leading to positive momentum in South African property values and operations and a simpler international investment capital structure.

Growthpoint said its strong position was further reinforced by the tailwinds of decreasing interest rates and a growth phase taking shape in the property cycle.

FINANCIAL PERFORMANCE                

Growthpoint noted that it delivered rewarding financial results in the face of ongoing external pressures.

Total property assets stand at R155.8-billion compared with R166.2-billion as at June 30, 2024, with strategic disposals to optimise the international investment portfolio being the main factor contributing to the 6.3% decrease.

The group’s South African Reit loan-to-value ratio decreased to a conservative 40.1% from 42.3% at financial year 2024, while the interest cover ratio improved to 2.5 times.

Growthpoint said it retained strong liquidity, with R900-million in cash and R4.7-billion in unused committed debt facilities and enjoyed excellent access to funding at attractive margins.

Finance costs in South Africa decreased, stemming from lower average borrowings compared to financial year 2024 and a lower weighted average cost of debt in financial year 2025 of 8.9%, and 6.9% when including foreign exchange instruments.

Growthpoint reported that total group revenue, excluding Capital and Regional (C&R), increased by 2.2% year-on-year to R13.3-billion.

Group operating profit, excluding C&R, increased by 5.5% year-on-year to R8.7-billion while distributable income increased by 3.1% to R5-billion.

The final dividend for the second half of financial year 2025 increased by 8.6% year-on-year to 63.3c a share.

Basic earnings a share increased by 329.7% to 161.10c, while basic headline earnings a share increased by 57% to 159.01c.

South African net property income increased by 5% year-on-year to R5.7-billion.

Rental renewal growth improved materially while vacancies reduced moderately, and like-for-like net property income (NPI) grew at 5.9%. The company noted that arrears remain firmly in check.

Together, these improving metrics signalled positive momentum, and all three of the portfolios were showing like-for-like growth, the company said.

Growthpoint described the South African balance sheet as robust, with conservative leverage at 34.5% providing capacity to grow decisively.

The South African portfolio value increased 2.2%, or R1.4-billion, driven by disciplined capital recycling, with proceeds from its R2.5-billion in assets sales – R2.7-billion including R120-million for Fountains View sold to Growthpoint Student Accommodation Holdings – fuelling reinvestment and targeted development to improve the portfolio quality.

Meanwhile, the company said the V&A's performance once again exceeded expectations for financial year 2025, driven by increased domestic and international tourism.

The company noted that like-for-like NPI at the V&A Waterfront increased 12.7%, driven by turnover rental revenue in both the retail and hospitality sectors as a result of an increase in tourism.

Growthpoint's 50% share of distributable income increased by 4.5% to R810.5-million year-on-year after taking into account increased net finance costs on external borrowings in line with the V&A's funding strategy.

The company said this momentum was expected to continue in financial year 2026 with the V&A anticipating double-digit earnings growth, supported by the development profits which will be generated on residential sales from 5 Dock road, despite the redevelopment of the Lux Mall, which commenced in July 2024, and the Table Bay Hotel which closed for operations from February, which will impact financial year 2026 performance.

Both redevelopments are scheduled to open towards December.

“The V&A Waterfront once again delivered stand-out results. Streamlining our international investments has simplified our capital structure and equity story, and disciplined treasury management kept finance costs below expectations,” said Sasse in the release.

LOOKING AHEAD

In the media release, Growthpoint said it sees the property cycle entering a growth phase.

Driving this positive shift are the improving performance from Growthpoint’s SA portfolio driven by strengthening property fundamentals, continued outperformance by the V&A, Growthpoint Properties Australia Limited’s (GOZ’s) strong operational fundamentals and reduced interest rates.

The company noted that key metrics were improving consistently across all three South African sectors, supported by Growthpoint’s capital recycling strategy into higher-yielding opportunities with noncore South African asset sales of R3.5-billion targeted for financial year 2026.

For financial year 2026, Growthpoint guides DIPS growth of between 3% and 5% and DPS growth of between 6% and 8%.

“We’re feeling a lot more confident,” said Sasse during a financial results presentation on September 10.

“We feel the property cycle . . . has bottomed out and is turning. South Africa is doing better, our liquidity and balance sheet look good, the international investments are . . . pretty solid and will continue to contribute . . .  going forward,” he said.