South African office and retail property vacancies are levelling off as more people return to the office and shop more, yielding good liquidity, Growthpoint Properties said yesterday.
Growthpoint CEO Norbert Sasse said the company was “steadily optimising our SA portfolio” on the back of a “strong balance sheet and good liquidity” across its segments.
Its total dividend for the full year period to end June 2022 firmed by 8.4 percent to 128.4 cents per share while group property asset values grew by 5.2 percent to R160.8 billion. SA REIT funds from operations for Growthpoint ended the period 13.1 percent percent stronger at R5.3bn. It saw a 5.1 percent increase in distributable income per share of 155.6 cents for the reporting period.
“We are encouraged by the improvements in the industrial and retail portfolios. However, the performance of commercial real estate, and the office sector especially, correlates closely with South Africa’s economic health, which remains weak and is constraining our local growth prospects,” he added.
Office vacancies for the company improved from 22.4 percent as at the end of March to 20.7 percent by the end of June.
This has been attributed to more “tenants returning to offices” albeit mostly on a hybrid working model while smaller users that previously gave up space have also started to return to the office towers.
Despite trends pointing to accelerated reduction of space occupancy by some tenants in the South African market, renewal rates for the company’s lucrative portfolios improved from 52.5 percent to 58 percent.
The retail portfolio had slightly higher renewal success rates of about 85 percent, with “increased letting activity from national” retailers whom however “continued to restructure their portfolios, right-size their spaces and rebase” rentals.
“Reflecting a less stressed retail market, Growthpoint’s shopping centres saw an 8.6 percent increase in average trading density, driven by the recovery in regional malls as shoppers returned to larger format shopping centres and spent more on larger basket sizes,” the company explained.
Growthpoint’s 50 percent in the V&A Waterfront in Cape Town, also contributed to its earnings for the period with a 52 percent rise in net property income.
This comes as international tourist arrivals in the Cape Town resort – hard-hit by Covid-19 travel bans and restrictions – recover, boosting arrivals through the international airport by 75 percent of pre-pandemic levels as at the end of June.
The Australian portfolio for Growthpoint also raised tangible assets per share by 9.4 percent during the review period, as “leasing success, yield compression and rent growth across the portfolio” yielded intensity.
Growthpoint classified the Australian portfolio as a “core investment” while the group increased its investment in the UK’s Capital and Regional (C&R) by R480 million in contribution to a £30 million (R606m) equity raise by the unit.
It also delivered solid letting with 55 leases signed from January to June 2022 at a 34 percent premium to previous rentals. For the six month period to end June, the UK division paid a £2.5 pence per share dividend, bumping up the pay cheque attributable to Growthpoint, utilised as a dividend investment option, to R50m.
“C&R expects its next six-month dividend to be similar. It has a pipeline of transformational and accretive repositioning projects driving income and value growth. We continue to believe in this platform, its management and its ‘needs-based’ community retail strategy,” Sasse added.
Growthpoint retained R935m before tax to fund capital expenditure and development and execute on its corporate strategies for its current trading year. It closed the year under review with R1.5bn in cash on its South African balance sheet, in addition to R10.3bn in unused committed debt facilities.
“This includes contingencies for the upcoming maturity of its USD Eurobond of R6.9bn in May 2023, which Growthpoint will be in a position to repay should debt capital markets in Europe not be conducive to refinancing.”
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