Growthpoint Properties Limited (JSE: GRT) has delivered robust operational results across its local and international investments for the financial year ending 30 June 2024, showcasing excellent performance from the V&A Waterfront, an improved contribution from Capital & Regional (C&R), and steadily improving metrics from its South African portfolio. However, the overall performance was tempered by the negative impacts of higher interest rates, lower dividends from Globalworth Real Estate Investments (GWI), and reduced profits from its South African trading and development division, resulting in a 10% decline in distributable income, in line with market guidance.

Norbert Sasse, Group CEO of Growthpoint Properties, commented:
"The improvement in our domestic portfolio’s property fundamentals and the strong operational performance of our international investments indicate that we may have passed the lowest point of the curve. We are seeing signs of improvement, and we successfully progressed our strategic initiatives in a tough year that ended with brighter prospects on the horizon."

Sasse noted that following South Africa's post-election environment, there is a bullish sentiment, resulting in a rise in foreign investment in bonds and equities. As interest rates are expected to decrease, the effects are likely to show in Growthpoint’s business from the second half of FY25, though the challenge of refinancing at higher rates continues to pressure earnings growth.

Financial Highlights and Operational Performance

• Distributable Income: Down 10% with a total dividend per share (DPS) of 117.1cps, based on an 82.5% payout ratio.
• Total Property Assets: Decreased by 2.8% to R174.7bn.
• Loan-to-Value (LTV) Ratio: 42.3%, up from 40.1%, impacted by Growthpoint Properties Australia's (GOZ) LTV.
• Interest Cover Ratio (ICR): 2.4 times (FY23: 2.9 times).

Growthpoint has focused on preserving liquidity, with R465.9m cash on its South African balance sheet and R6.3bn in unutilised committed debt facilities. The company will retain R842.3m from its payout ratio.

Interest rates remain a key challenge, with 78.9% of SA debt fixed for an average term of 1.9 years. Net SA finance costs increased by R381.0m from FY23, and the weighted average term of debt extended to 4.0 years.

International Investments

Growthpoint continues to optimise its international portfolio, with 42.1% of property assets located offshore and 32.4% of distributable income per share (DIPS) earned abroad. Key highlights include:

• GOZ (Australia): 57 office and industrial properties valued at R54.7bn. Portfolio occupancy stands at 97%, with 80% leased to government and large organisations.
• C&R (UK): Six community shopping centres valued at R9.2bn. New leases signed at an 8.8% rental premium.
• GWI (Poland and Romania): Portfolio value decreased by 10.8% due to the disposal of its industrial portfolio.

South African Portfolio

Growthpoint owns and manages a diversified South African portfolio of 345 retail, office, and industrial properties valued at R66.3bn. Key operational improvements include:

• Vacancies: Reduced from 9.7% to 8.7%.
• Rental Renewal Growth: Improved from -12.9% to -6.0%.
• Bad Debts and Arrears: Reduced, trending back to long-term norms.

Growthpoint has invested R2.1bn in upgrades and new developments, and sold 17 non-strategic properties for R907.7m. It plans to sell R2.8bn in additional assets during FY25.

V&A Waterfront Performance

The V&A Waterfront, in which Growthpoint holds a 50% stake, delivered stellar results, driven by tourism and strong trading density growth of 4.1%. New developments include the Union Castle building, fully let with Marble restaurant and a Nike store, opening in time for the festive season.

Growthpoint Investment Partners

Growthpoint’s alternative real estate platform continued to grow, ending FY24 with R18bn of assets under management (AUM). Its capital-efficient co-investment platform includes Healthcare Property Holdings, Student Accommodation Holdings, and Lango Real Estate.

Outlook

Growthpoint remains optimistic for FY25, with a 2% to 5% decline in DIPS expected due to the continued impact of interest rates. However, positive growth is anticipated in FY26, as interest rates stabilise and strategic initiatives bear fruit.

Sasse concluded:
"We have made gains in every available area this year. Growthpoint is a strong, diversified business with talented employees, a solid financial foundation, and a clear strategy for delivering value to all stakeholders. We have much to look forward to."

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