Burstone has raised its distributable earnings guidance by about 2%-3%, citing income growth in its South Africa real estate portfolio and increasing contribution from some international investments.
The uplift is driven by 4%–5% like-for-like net property income growth from the South African portfolio, led by a strong retail performance, with offices holding steady and industrial assets remaining resilient.
Offshore, Australian industrial investments are set to lift returns as rents, about 20% below market, move closer to prevailing levels, the group said in its voluntary update for the year to end-March.
The group, led by CEO Andrew Wooler, is set to maintain a 90% dividend payout ratio for the full year.
“Operating conditions are improving in South Africa as business confidence stabilises with resilient retail and industrial sectors and early signs of recovery in office. In Europe, modest growth is supporting demand while Australia remains resilient with strong competition for assets despite higher rates,” the group said.
The South African portfolio, which accounts for 80% of Burstone’s income, continues to anchor the group, with vacancies expected to improve to 3%-4% from 6.7%. Negative reversions persist, however, driven by the renewal of long-dated office leases at above-market levels, it said.
Retail in the country is expected to deliver like-for-like net property income growth of 8%-10%, supported by strong trading and lower vacancies, while office improves marginally as vacancy gains are offset by negative reversions. Industrial is expected to be in line with the previous year with a tenant failure offset by stronger vacancies and positive rental reversions.
The group expects a loan-to-value ratio of about 40% for the financial year due to capital deployment into its international platforms, offset by ongoing asset disposals.
It has secured R4.4bn in third-party equity commitments for deployment into international opportunities in the short to medium term and has recently launched a new light-industrial platform in partnership with Hines European Real Estate Partners III.
In its Hines partnership, the group is nearing completion of the first tranche of acquisitions worth about €40m with a strong near-term pipeline already identified.
The Pan-European Logistics platform is expected to deliver a slightly lower like-for-like performance than the previous year as softer occupier demand weighs on the segment.
In Australia, the group secured an additional A$170m (R2bn) equity commitment from TPG Angelo Gordon to deploy into value-add industrial opportunities, strengthening its capacity to pursue targeted growth in the segment.
The group sold R800m of South African assets during the year, achieving about a 4%-5% premium to book value excluding Balfour.
“Our operational performance remains resilient, supported by growth in the South African portfolio and rising international activity, with fee income and co-investment returns set to become a more meaningful contributor to earnings as we scale our capabilities,” the group said.
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