SA’s largest commercial property group, Growthpoint, is ramping up its strategy to improve the quality of its portfolio, having disposed of 161 properties since 2016 to the value of R12.5bn, with nearly R3bn more in assets on the chopping block.
In the year ended June, the group sold 19 properties it deems noncore in its SA portfolio for nearly R1.2bn, with the company set to sell R2.8bn worth of assets in the 2025 financial year.
Norbert Sasse, group CEO of Growthpoint, said the improvement in the company’s domestic portfolio’s property fundamentals and the strong operational performance of its international investments indicate that they may have passed the lowest point of the curve and are now seeing signs of improvement.
“We successfully progressed the company’s strategic initiatives in a year that was as tough as ever but ended with brighter prospects on the horizon,” Sasse said, adding that the results of the May election had been a boon for investment.
“There is undoubtedly a greater sense of positivity, which has resulted in a rise in foreign investment in SA bonds and equities and will become more evident in the property sector as higher interest rates start working their way out of debt-servicing costs.”
Listed property stocks have had a strong start to the year, with the property index on the JSE up 26% year to date.
The group, worth R50bn on the JSE, owns and manages a portfolio of 345 logistics, retail, office and industrial properties valued at R66bn. Its flagship office space is Discovery headquarters in Sandton. It also holds 57 office and industrial properties in Australia, valued at about R55bn.
The group on Wednesday reported a decline in distributable income per share as high interest rates continued to negatively affect earnings.
SA’s largest JSE-listed real estate investment trust (Reit) reported distributable income per share decreased 10% to 141.9c for the year ended June, which was within the 10%-12% guidance range provided for the 2024 financial year.
Dividend per share decreased 10% to 117.1c, it said in a statement on Wednesday.
Growthpoint has assets in SA, the rest of Africa, Eastern Europe, Australia and the UK, with an increasing emphasis on the number of assets it holds offshore.
Most SA key performance indicators improved, including arrears, rental reversion rates, valuations and vacancies in office and retail.
The V&A Waterfront was a standout performer, driven by the positive effect of increased tourism, with distributable income increasing 12.6% to R775m. Offshore investments contributed 32.4% to Growthpoint’s distributable income per share and comprise 42.1% of group property assets.
Total group revenue increased 4.8% to R14.4bn, but operating profit decreased 2% to R8.7bn. Distributable income amounted to R4.8bn from R5.36bn.
Funds from operations per share decreased 11.5% to 131.5c, while basic headline earnings per share decreased 32.3% to 101.26c. Offshore income decreased by 1.1% in rand terms to R1.56bn.
High interest rates across the group continue to negatively affect distributable income with total cost of funding increasing 16.2%, it said.
The group disposed of 17 SA properties, including three office properties, for R907.7m during the year.
Growthpoint expects high interest rates will continue to affect the real-estate sector and its domestic operations and offshore investments. While global political uncertainty remained a concern, the political landscape in SA was showing signs of improvement after the May election, it said.
The V&A Waterfront’s performance exceeded expectations in 2024, driven by increased domestic and international tourism. The redevelopment of the Lux Mall, which started in July, and the Table Bay Hotel, with a closure from February 2025, will have a negative effect on the financial year 2025’s performance. Both redevelopments are scheduled to open towards the end of 2025.
The V&A Waterfront anticipates achieving mid-single-digit growth for the 2025 financial year.
International expansion is constrained by Growthpoint’s high cost of capital, domestically and offshore. But it is committed to balance sheet strength, and so the group will continue to focus on optimising its existing investments.
“The stable and improving metrics from our SA business are encouraging, and we will continue improving the quality of this portfolio, including its sustainability, by championing renewable energy and similar solutions that support environmental and social stewardship,” Sasse said.
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