Growthpoint Properties said yesterday that high interest rates were affecting its financial performance and it forecast a lower distribution per share for its 2023 financial year to June 31.
In a trading update for the nine months to March 31, the group said its domestic retail and industrial portfolios were steadily recovering, and the performance of the office sector appeared stable, notwithstanding South Africa’s economic challenges.
The V&A had recovered faster than expected due to the return of international tourism and was expected to deliver a solid result.
The contributions from our international investments were in line with expectations.
The group said it was optimising its international investments due to the unfavourable global economic environment and to preserve balance sheet strength.
The share price of the biggest South Africa based REIT on the JSE slipped 4.03% to R11.91 by early yesterday afternoon.
The group’s $425 million Eurobond that matured in May 2023 was refinanced.
Rising interest rates were however negatively also impacting the international and domestic real estate sector in general.
Its South African portfolio reported mixed results for the nine months to March 31 due to the weak economy, frequent power outages and political uncertainty.
Leasing activity was positive. Vacancy rates increased slightly.
Arrears improved and lease lengths on renewal were steady at 3.5 years.
Twenty-eight non-core properties were transferred or sold. These included R143.8m for the remaining 50% of Adcock Ingram, which was sold to the Growthpoint Healthcare REIT.
An additional 10 properties were sold for R1.6bn and were awaiting transfer. Another 12 properties of approximately R500m were approved for disposal.
In the retail portfolio, trading densities grew 9.8% in the nine months, showing ongoing recovery. This was supported by stable vacancies.
“We are addressing significant vacancies through letting strategies, property disposals and redevelopments, such as at Bayside Mall in Cape Town and River Square Shopping Centre in Vereeniging.”
Office vacancies were stable at 20.1% and below their peak of 22.4% at March 31, 2022.
“We have observed growing demand in specific regions, especially the Western Cape, KwaZulu-Natal and Rosebank in Gauteng. Some areas show increased leasing activity, such as our Illovo portfolio, where vacancies have nearly halved, decreasing from 45% to 24%.”
Western Cape vacancies were at 11.4%, down from a high of 16.8% in December 2021 and KwaZulu-Natal vacancies were at 4.2%, down from 7.8% in December 2021. Five non-core office assets were sold for R129.7m.
In the Industrial sector development supply was decreasing due to high construction inflation, balancing supply and demand for inventory.
Vacancies had increased marginally from 4.3% at half year stage to 5% with low vacancies in the coastal areas at 0.8% for Cape Town and 2.3% for KwaZulu-Natal. Gauteng vacancies were at 7.3%. Two more properties were affected by business rescue applications post-March 2023.
Non-institutional investors were expressing strong appetite for industrial acquisitions and 20 non-core properties were transferred for R589.3m, with signed agreements for R111.7m for three more assets, pending transfer.
Eight properties were approved for sale of around R320m.
V&A continued its rapid recovery from the pandemic-induced downturn, significantly driven by the 133% increase in international tourist arrivals compared to pre-pandemic levels.
However, this was tempered somewhat by economy-wide challenges, such as ongoing load shedding and above-inflation cost increases.
Retail sales, visitor numbers, and hospitality were all boosted by increased international tourism, new direct flights to Cape Town, and the resumption of conferences, sports, and other events.
Retail sales surpassed the last normal levels by 30%, reaching a record high of over R1bn in December 2022. This occurred even though foot traffic only recovered to 86%.
In the hotel sector, increased demand led to improved revenue per available room, at 26.3% higher than pre-pandemic levels. Occupancy levels improved by 3% for the quarter ended March 31, 2023.
The marine and industrial sector remained resilient, with significant upside from the casual berthing of yachts.
Precinct-wide, the V&A had a negligible 0.4% vacancy rate and was enjoying extraordinarily high demand for office space.
Launched in December 2021 with a R2bn portfolio of seven properties and 4 979 beds, the Growthpoint Student Accommodation REIT currently has 7 157 beds. Occupancies were a pleasing 94%.
Growthpoint Healthcare REIT invested in its first healthcare warehousing and distribution centre in September 2022, acquiring a 50% share in the 22 455 square metre Adcock Ingram pharmaceutical facility in Midrand. Bidvest Properties acquired the other 50% undivided share.
BUSINESS REPORT