Growthpoint Properties raises DIPS growth guidance for 2025

Growthpoint Properties has upped its distributable income per share (DIPS) growth guidance to 2% to 3% for its 2025 financial year due to improved performance, better property fundamentals in South Africa, continued outperformance by the V&A Waterfront, and lower interest rates.

The largest JSE-listed South African Real Investment Trust had reported DIPS growth of 3.9% at the half-year stage, compared to the initial full-year 2025 guidance of a decrease in DIPS of 2% to 5%.

In March, the full-year guidance was updated to DIPS growth of 1% to 3%. But a strong performance, as indicated by Thursday's trading statement, resulted in the guidance being lifted once more. Growthpoint management said growth would be offset somewhat by lower offshore income due to the sale of their stake in Capital & Regional (C&R).

In an investor update for the 9 months to March 31, management said several positive local developments had supported the group’s performance in spite of a decline in the Business Confidence Index in the second quarter, as reported by RMB/BER this month.

These included longer periods without load shedding and a favourable interest rate outlook. All three of the domestic portfolios showed improved performance.

“We have a strong set of initiatives, both innovative and established, in place to keep improving the quality of our portfolios and underlying operational metrics,” they said.

Growthpoint Investment Partners (GIP) was performing as expected. The V&A continued to exceed expectations, supported by increased tourism and asset management that was unlocking the precinct's opportunities.

The group’s international investments were expected to continue performing in line with guidance.

A target had been to dispose of non-core assets of R2.8bn for the year, by reducing exposure to the office sector, disposing of older industrial and manufacturing assets, exiting non-core retail properties in deteriorating central business districts, as well as smaller retail and specialised assets such as motor dealerships.

However, transfers of properties sold were taking longer than expected due to delays in Competition Commission approvals, rates clearance certificates, and registration at the Deeds Office.

“We sold and transferred 15 non-core assets for R1.1bn. An additional R445m transferred since April 1, while assets worth R1.2bn were still awaiting transfer, of which R783.2m is expected to transfer by June 30, 2025, bringing anticipated disposals for the year to R2.3bn, R500m less than the target.”

Of disposals awaiting transfer, R783.2m related to the sale of 11 Adderley, Golden Acre, and Grand Parade, which had been lodged at the Deeds Office.

Some R1.2bn of development and capital expenditure was incurred for the SA portfolio, including the redevelopment of Bayside Mall, Table View (R147.1m), The Hilton Canopy Hotel, Longkloof Studios, Gardens (R192.8m), 36 Hans Strijdom Avenue, CBD (R103.7m), and R147.4m to develop modern logistics warehouses in the Western Cape.

In the South Africa portfolio, key indicators showed “pleasing improvements across all three sectors.” Vacancies improved to 8.4% from 8.7% at June 30, 2024, and were slightly above 8.3% at December 31, 2024. The increase is largely due to the addition of vacancy from the newly completed speculative development, Arterial Industrial Park Phase 2 in Cape Town.

Notably, the office sector vacancies improved to 14.7% from 15.9% at the half-year. National market data showed that, while earlier improvement was evident, future vacancy reductions may plateau due to structural changes in employment and the tenant mix.

At Globalworth Real Estate Investments in central and eastern Europe, a decrease in dividend income was expected due to the increase in their cost of debt resulting from their bond refinance in May 2024.

In the logistics and industrial portfolio, vacancies improved to 4.4% from 5.2%, primarily due to the leasing of new speculative developments, albeit higher than 3.5% recorded at the half-year stage.

At the V&A, earnings before interest and tax (EBIT) grew by 23%. This was from a full period of office rental from Investec and the inclusion of The Portswood and The Commodore Hotels, now owned by the V&A and managed under contract by Legacy.

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