Growthpoint’s positive financial outlook enhanced: Half-year results delivered

Growthpoint Properties Limited (JSE: GRT) delivered stronger-than-expected results for its six-month interim period ending 31 December 2024

Norbert Sasse, Group CEO of Growthpoint Properties, comments, “Growthpoint has delivered strong results while effectively executing our strategic priorities, streamlining international investments through the disposal of Capital & Regional pls C&R) and further strengthening our SA portfolio. This progress was reflected in the improved performance of the SA portfolio. Additionally, disciplined treasury management kept finance costs below expectations, stringent cost control enhanced efficiency, and again, the V&A Waterfront outperformed.”

Key takeaways from the presentation include:

Improved Performance: Growthpoint’s distributable income per share (DIPS) increased by 3.9% to 74.0cps, and the company upgraded its full-year DIPS guidance to 1%-3% positive growth.

SA Portfolio Strength: The South African portfolio showed strong performance, with improved rental growth, lower vacancy rates, and better expense efficiencies, contributing to an overall 6.8% like-for-like net property income (NPI) growth.

International Divestment: Growthpoint streamlined its international investments by disposing of Capital & Regional, optimizing its investment portfolio and acquiring a stake in NewRiver REIT.

Sustainability Initiatives: The company is advancing its sustainability efforts, having installed solar capacity exceeding its FY25 target and achieving a 6-Star Green Star rating for an industrial property.

V&A Waterfront Outperformance: The V&A Waterfront delivered a 16.6% increase in like-for-like NPI, driven by increased tourism and retail activity, and continued to contribute significantly to Growthpoint’s overall performance.

Reduced Finance Costs: Disciplined treasury management kept finance costs below expectations, with a lower weighted average cost of debt from 9.6% to 9.2%.

Strategic Asset Management: Growthpoint is focused on improving the quality of its SA portfolio, with targeted disposals and investments in logistics and industrial assets, and reducing office exposure.

Strong Balance Sheet: The loan-to-value ratio decreased to 40.8%, and Growthpoint maintained strong liquidity with R0.8bn in cash and R5.2bn in unutilised debt facilities.

GOZ Contributions: Growthpoint Properties Australia (GOZ) remains a core investment, contributing 21.2% to DIPS, despite a decrease in distribution per share due to increased dividend withholding tax.

Positive Outlook: Growthpoint is optimistic about future growth, supported by operational resilience, strategic execution, and improving economic conditions, aiming to execute significant strategic asset sales for further portfolio enhancement.

 
Strategic Performance and Financial Resilience
 
Sasse, expressed satisfaction with the company’s strategic and operational execution. Growthpoint has done well in delivering strong results while effectively executing our strategic priorities,” Sasse stated. This progress was reflected in the improved performance of the SA portfolio. Additionally, disciplined treasury management kept finance costs below expectations, stringent cost control enhanced efficiency, and again, the V&A Waterfront outperformed.”
 
Growthpoint’s strategic emphasis on streamlining operations and optimising its portfolio has improved financial metrics. Total property assets amounted to R155.2 billion, reflecting the strategic disposal of Capital & Regional plc (C&R), which resulted in an 11.2% decrease in total assets. The group’s SA REIT loan-to-value (LTV) ratio fell to 40.8% from 42.3% at the close of FY24, primarily due to the C&R disposal.

Strategic Asset Disposals and Balance Sheet Strengthening
 
Growthpoint has proactively recycled capital from underperforming assets into areas with superior growth prospects. During the reporting period, the company recorded asset sales totalling approximately R580 million, aiming for R2.4 billion in total disposals for the financial year. “We have been very intentional in recycling capital from underperforming assets into areas with stronger long-term growth prospects,” explained Sasse. By reducing debt and optimising its portfolio, Growthpoint has secured improved funding conditions and enhanced its financial flexibility.
 
Looking ahead, Growthpoint intends to execute R2.8 billion in strategic non-core SA asset sales for the full financial year, thereby enhancing the quality and sustainability of its property income. Despite temporary closures in certain areas due to significant projects underway, the V&A Waterfront is poised for mid-single-digit growth for the entire year.

Diversified Portfolio and International Investments
 
Growthpoint manages a diversified portfolio, including logistics, industrial, office, and retail properties. Its South African portfolio, valued at R67.3 billion, contributed 50.1% of the DIPS. Growthpoint’s international investment strategy focuses on key markets, including Australia and the UK. Growthpoint Properties Australia (GOZ) remains a core investment, contributing 21.2% to the company’s DIPS.
 
GOZ has maintained a robust balance sheet, reduced its gearing, and continued to perform well in its directly owned industrial and office properties. Recent strategic highlights for GOZ include the establishment of the Growthpoint Australia Logistics Partnership (GALP) and launching the Growthpoint Canberra Office Trust (GCOT). Despite challenges, such as increased dividend withholding tax, GOZ contributed a R533.2 million net distribution to Growthpoint.
 
Growthpoint continues to evaluate opportunities to maximize the value of its investment in Globalworth Real Estate Investments (GWI), which invests in Poland and Romania. Higher interest rates on its Eurobond refinance impacted GWI’s dividend, yet the company maintained a strong balance sheet with gearing at 38.1%.
 
Recovery in the Office Market
 
Growthpoint’s performance in the office sector has been remarkable, driven by a recovery in office rental growth, particularly in Cape Town and Durban. The office sector, which the shift had previously challenged to hybrid work models, is now experiencing renewed demand as companies encourage employees to return to the office. “We are witnessing a clear recovery in office demand in Cape Town and Durban, where high-quality office nodes are drawing significant tenant interest,” said Estienne de Klerk, Chief Executive Officer (South Africa) at Growthpoint Properties. “Companies are placing a premium on well-located, high-quality office spaces in areas with robust infrastructure and accessibility.”
 
Cape Town’s office market has demonstrated resilience, with strong demand in premium locations such as the V&A Waterfront. Growthpoint’s portfolio in the Western Cape has performed remarkably well, featuring positive rental reversions and near-full occupancy in top-tier office buildings. Likewise, Durban and the wider KwaZulu-Natal region have experienced heightened leasing activity. “While the office sector in Gauteng remains under pressure, Cape Town and Durban have shown to be more resilient markets,” added de Klerk.
 
Industrial Growth: Focus on Logistics Hubs
 
Growthpoint’s industrial property portfolio has consistently performed well, driven by demand from logistics providers, e-commerce companies, and manufacturers. The company has been systematically expanding its footprint in strategic locations such as the Samrand Logistics Hub (Gauteng), Cape Town’s Arterial Industrial Precinct, and Riverwoods Industrial Park in KZN. “The industrial sector continues to be a strong performer in our portfolio, with significant demand for modern logistics and warehousing space,” noted de Klerk.
 
The V&A Waterfront’s Exceptional Performance
 
Among all of Growthpoint’s assets, the V&A Waterfront in Cape Town stands as a top performer, delivering strong returns and reinforcing its value as one of South Africa’s premier real estate investments. The Waterfront achieved a 15.5% increase in net property income and maintained near-full occupancy in both office and retail spaces. “Cape Town’s tourism sector is a key driver of growth for the V&A Waterfront, and we are witnessing record levels of activity,” said de Klerk. The resurgence in international and domestic tourism, with over 83 vessels docking at the Waterfront this season, has provided a significant economic boost to the precinct.
 

Sustainability Highlights and Progress toward Carbon Neutrality
 
Growthpoint has made significant progress in sustainability initiatives, earning a 6-Star Green Star Existing Building Performance rating for its Meadowbrook Estate facility – the first industrial property in South Africa to achieve this distinction. The company’s installed solar capacity has reached 52.46MWp, and it has secured a milestone Power Purchase Agreement (PPA) for renewable green electricity, which will power its Sandton office buildings in FY26.
 
Sasse closed the presentation, saying, “We continue to observe positive momentum across the portfolio, supported by operational resilience and strategic execution.”

With a robust portfolio of high-performing assets, ongoing industrial expansion, and a disciplined approach to capital allocation, Growthpoint is well-positioned for sustained growth. As interest rates stabilise and economic conditions improve, the company’s emphasis on asset quality and financial strength will be key drivers of long-term value creation.
 
Growthpoint remains committed to enhancing its portfolio through strategic disposals and developments while optimising its international investments. As the company capitalises on emerging trends in the real estate sector, its strategic actions are expected to yield ongoing benefits for shareholders and stakeholders alike.