Growthpoint Properties, part-owner of V&A Waterfront, one of SA’s most popular destinations hit by Covid-19, has told investors it will pay a much reduced dividend due to the pandemic and embattled economy.
“Our board is evaluating all options,” CEO Norbert Sasse said in a presentation to journalists. “The SA economy is in deep trouble and the outlook is very negative.”
Sasse, who has run Growthpoint, SA’s largest landlord, for 19 years, said the company was enduring the most difficult period in its history, battling through an economy that was battered by the Covid-19 pandemic and subsequent lockdowns that left it having to offer R436m in relief to tenants who couldn’t pay rent.
As a real estate investment trust (Reit), Growthpoint is obligated to pay a minimum of 75% of its income out as dividends, but has historically paid out 100% of its income. It and other property groups adopted the Reit dispensation and capital structure at the end of 2013 and in 2014 because of varied benefits, with the main attraction being that payouts were taxed in the hands of shareholders rather than the company.
Property has traditionally been a popular investment class for retail investors, with its promise of a guaranteed income stream. Before the Covid-19 outbreak, the sector was showing signs of recovery, having been caught up in a scandal involving alleged irregular trade in the stock of companies in the Resilient stable. Since the Covid-19 outbreak, the sector has been among the hardest-hit, along with banks, reflecting the inability of many of their clients to meet payment obligations.
Growthpoint owns and manages a diversified portfolio of 440 property assets across SA, valued at R73.4bn. It also has a 50% or R9.4bn interest in the V&A Waterfront, the most highly valued commercial asset in SA, and exposure to 58 properties in Australia valued at R51.8bn
During the reporting period, Growthpoint acquired a 52.1% investment in LSE-listed UK mall owner Capital & Regional, which has a secondary listing on the JSE and owns a portfolio of seven community shopping centres valued at R14.8bn, for R2.9bn.
Finally, through its 29.4% investment in LSE AIM-listed, Globalworth Real Estate Investments (GWI), it has an interest in 62 properties in Romania and Poland, of which its share is valued at R17.2bn.
Growthpoint’s net property income from its SA business fell 8.7% (R559m), of which 93.0% was directly because of the impact of the lockdown in the final quarter of its financial year, including R277m of discounts granted to those tenants most severely affected by the lockdown between April and June 2020.
Arrears increased in all sectors to an unprecedented high of R511m.
The company’s local portfolio lost 8.8%, or R7.1bn of its value, during the year.
Capital & Regional was hard hit during the year, being valued at R1.5bn at the end of June 2020.
Three months of disruption to shopping centres led to a deterioration in rent payments as many shops couldn’t trade, and a decline in property values across the industry was accelerated.
Growthpoint declared a 106c per share dividend for its half-year and has yet to announce its second-half dividend.
Sasse said the company would focus on three pillars, expanding internationally, streamlining its SA portfolio, and introducing new revenue streams through third-party trading and development as well as funds management.
Portfolio manager at Old Mutual Investment Group, Evan Robins, said Growthpoint had done well to diversify further offshore, such that foreign assets now accounted for 40.8%, up from 30.3% a year ago.
Correction: September 10 2020
In an earlier version of this story we said Growthpoint had told investors they may have to wait two years before receiving dividend payments. In fact, the company said it will pay a much reduced dividend.
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