JSE-listed real estate investment trust (Reit) Growthpoint Properties has increased its distributable income per share (DIPS) for the six months ended December 31, 2024, by 3.9% year-on-year to 74c.

Distributable income amounted to R2.5-billion in the period, compared with distributable income of R2.4-billion in the prior corresponding half-year period, marking a 4.3% year-on-year increase.

The company attributes the increase to an improved contribution from the group’s South African segments, as well as like-for-like rental growth, lower negative rent reversions and reduced vacancies in the logistics and industrial segment.

Growthpoint has also been focused on improved expense efficiencies and recoveries.

The group is active in the office, industrial and retail sectors and often develops assets for third parties. Its international operations comprise 57 properties valued at R54-billion in Australia, as well as 59 properties valued at R15-billion in Poland and Romania.

The company’s South African operations, which comprise a portfolio of 388 directly-owned properties valued at R70-billion, posted a 6.2% increase in net property income to R2.9-billion in the reporting period.

Notably, the V&A Waterfront asset, in the Western Cape, delivered a 16.6% increase in net property income on a like-for-like basis on the back of increased tourism in the area.

Growthpoint’s 50% share of distributable income from this property increased by 4.5% to R398-million in the six months under review, compared with the six months ended December 31, 2023.

The group’s dividend a share increased by 3.7% year-on-year to 61c in the period, compared with a dividend a share of 58.8c having been reported in the prior half-year.

The Reit’s loan-to-value ratio improved to 40.8%, compared with 42.3% at the end of June 30, 2024, while net asset value per share decreased by 2.6% to R19.67 in the six months under review, mainly owing to Growthpoint’s disposal of the Capital & Regional (C&R) business and asset write-downs in the Growthpoint Properties Australia division.

C&R was identified as a noncore investment given its size and inability to scale the business. It was sold for R2.4-billion, which Growthpoint settled partly in cash and partly in shares.

As of December 31, 37.9% of Growthpoint’s portfolio by book value is located offshore.

Growthpoint continues to dispose of noncore assets locally, having sold 12 properties for R589-million in the period under review. Four properties valued at R748-million were held for sale at the end of December.

The company explains that despite disposing of 37 properties, mainly B and C grade office assets, for a total R5.2-billion since the 2015 financial year, the office sector still suffers from an imbalance of supply and demand.

The sector has, however, reached the bottom of a cycle and the company is seeing an improvement in the sector’s key performance indicators.

In the industrial segment, Growthpoint continues to prioritise the growth of its investments and improve its exposure to better-performing logistics sector assets.

For example, Growthpoint spend R945-million on redeveloping the Bayside Mall, and more than R300-million on upgrades at Table View, The Hilton Canopy Hotel, Langkloof Studios and the Gardens properties, in the Western Cape.

An additional R182-million was spent on developing new high-quality modern logistics warehouses.

Growthpoint’s vacancies in the industrial portfolio totalled 3.5% at the end of the half-year under review, which is the lowest level since June 2018.

The Reit also spent R117-million on solar installations in the period under review, with its total installed solar capacity now being 52 MW.

A milestone power purchase agreement signed with Etana Energy for the acquisition of 195 GWh/y of renewable energy will be implemented on a staggered basis, with about 30 GWh/y coming on stream in the next financial year and the full capacity by June 30, 2028.

The group remains well funded with R5.2-billion in unused funding facilities in South Africa, as well as R826-million of cash on the South African balance sheet.

The group’s vacancy rate improved to 8.3% in the reporting period, from 8.7% in the prior comparable period, which is similar to levels last recorded in June 2019.

OUTLOOK

The Reit says inflation declines and lower interest rates in South Africa are boding well for the company, but global economic uncertainties remain a concern.

The company will continue to focus on strengthening its balance sheet and fulfilling commitments towards environmental, social and governance objectives, as well as improving the quality of its South Africa portfolio through capital allocation, proactive tenant retention strategies and green building initiatives.

“The improving perception of the South Africa political landscape is creating a more favourable environment for the Reit sector. This, coupled with lower inflation, further potential interest rate relief during the remainder of the financial year and limited loadshedding, will positively impact on all property sectors,” Growthpoint South Africa CEO Estienne de Klerk states.

He elaborates that the office sector seems to have stabilised and is outperforming expectations in Cape Town and Umhlanga Ridge, while the logistics and industrial sector is benefiting from a more balance supply-demand dynamic.

In terms of international operations, De Klerk says Australia is showing signs of stabilising rates, with its first interest rate cut of 25 basis points having occurred in February this year. Two additional interest rate cuts are anticipated in the remainder of the calendar year.

De Klerk is confident that the group is positively positioned for the remainder of the year, expecting DIPS to grow by between 1% and 3% in the full-year.