Growthpoint looks offshore for growth


Growthpoint looks offshore for growth


Published Date: 2019-03-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Growthpoint looks offshore for growth

The real estate investment trust says it expects little to no growth from its SA property portfolio this year due to the weak economy.

Growthpoint says already weak property fundamentals in South Africa are getting worse. It expects little to no growth from its SA assets, which make up almost two-thirds of its total property portfolio. While the V&A Waterfront benefits from local and international tourists and is positioned to deliver growth, it says it's not immune to the erosion in the domestic economy and turnover rentals declined in the first half of its financial year. Although the water crisis in Cape Town is under control, the V&A is building its own desalination plant to take it entirely off the water grid.

The real estate investment trust (REIT) has a portfolio of 447 directly owned properties in South Africa valued at R77.2 billion. It also holds a 66% stake in Growthpoint Properties Australia, which owns 59 properties worth R38.3 billion. On top of those, it owns 50% of the V&A, a 29% stake in London-listed Globalworth Real Estate Investments and a 22% stake in Warsaw-listed Globalworth Poland Real Estate.

Reporting back for the six months to end-December, the group said the value of its investment property rose by R1 billion over the period to R115.5 billion as positive property fundamentals in Australia made up for a slight decrease in South Africa due to the weak economy. Local vacancies rose to 5.6% from 4.6% as vacant office space increased to 10.2% from 8.4%. Growthpoint Australia reported a decline in vacancies to 1.5% from 2.4%.

Gross revenue increased by 4.3% to R5.72 billion from a year earlier as SA revenue increased by 3.1% and revenue from Growthpoint Australia grew by 8.4%. Headline earnings per share declined by 19% to 81.77c. Its net asset value increased by 0.5% to R25.70 per share and it's declared an interim distribution of 105.8c per share, up 4.5%. It said if there was no further deterioration in the SA business environment its full-year dividend should rise by the same margin.

Growthpoint said most of this year's growth would come from its international investments. Apart from Australia, additional returns would come from its Central and Eastern European investments in Globalworth. It singled out Romania and Poland as two growth markets.

Back home, Growthpoint said it had provided Edcon with a R110 million equity injection in return for a stake in the retailer. However, it said it declined to reduce Edcon's rent as some other landlords did as it didn't want to compromise its business model, which is based on contractual leases that provide a steady stream of annuity income. It said it had decreased its exposure to Edcon by about 9,000 square metres since December 2017 and expected to cut it but at least 18,000 square metres over the next two years.

Its shares closed 0.9% higher at R24.73.


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