Growthpoint eyes UK mall owner as SA comes under pressure


Growthpoint eyes UK mall owner as SA comes under pressure

Published Date: 2019-09-12 | Source: Stephen Gunnion | Author: Stephen Gunnion

Growthpoint eyes UK mall owner as SA comes under pressure

The real estate investment trust says its 2020 dividend will be nominally higher at best.

Growthpoint Properties is in talks to take a majority stake in UK shopping centre Capital & Regional (C&R) as it warns that next year's distribution is likely to be flat.

However, it said there was no certainty that it would go ahead with an offer for the group, which focuses on community shopping centres mostly around London. The deal, if it goes ahead, would see Growthpoint taking control of C&R through a combination of a partial offer in cash for shares and an injection of capital in return for more new shares.

Growthpoint is the JSE's largest SA-focused real estate investment trust (REIT) with a portfolio of 450 directly owned properties in SA worth R78.3 billion. It also has a 77% stake in Australian-listed Growthpoint Properties Australia, which owns 57 properties valued at R38.7 billion. Equity-accounted investments worth R15.5 billion include a 50% stake in Cape Town's V&A Waterfront and a 29.8% interest in London-listed Globalworth Real Estate Investments, which owns properties in Poland and Romania. Buying C&R would add UK property to the mix.

Releasing results yesterday, the REIT said the weak macro-economic environment in SA would limit its ability to grow dividends in the coming year, with a nominal increase at best.

It said the more than two-thirds weighting of its assets to SA would counter better fundamentals in the Australian, Polish and Romanian markets.

In its home market, domestic tenants continued to downsize their space, placing pressure on all property fundamentals.

For the year to end-June, revenue rose 5.7% to R11.6 billion while operating profit increased by 4.4% to R8.5 billion. Earnings per share (EPS) dropped 6.4% to 214.46c and headline EPS fell 1.1% to 158.1c. It's increased its total dividend for the year by 4.6% to 218.1c per share.

Over the year, the REIT reported a rise in vacancies to 5.8% of its portfolio from 4.7% a year earlier due to increased vacancies at its retail, office and industrial properties. It said gearing remained conservative at a 36.4% loan-to-value (LTV), up from 35.2% last year.

Separately, C&R reported a 4.5% decline in first-half adjusted profit to £14.8 million as a number of retailers entered company voluntary arrangements (CVAs) and administration. Under International Financial Reporting Standards methodology, it reported a £55.4 million loss for the period due primarily to a fall in property valuations, driven by negative sentiment towards retail assets and the income impact of the CVAs. It has held off on announcing a level for its interim dividend pending the outcome of talks with Growthpoint.

Growthpoint has until the close of business on 9 October to make an offer for C&R under UK takeover rules.

Growthpoint declined 2.6% to R22.88 yesterday while Capital & Regional's shares jumped 7.4% to R3.33.

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