Growthpoint's strategic portfolio adjustments lead to improved financial performance

Growthpoint Properties, the JSE’s biggest primary listed REIT, exceeded the top end of its guidance for the year to June 30, with distributable income per share (DIPS) up 3.1% to 146.3 cents, while the dividend was raised 6.1% to 124.3 cents per share.

Growthpoint’s return to growth comes a year earlier than initially expected. It entered the 2025 financial year forecasting an earnings contraction of -2% to -5%. Better-than-expected half-year results, driven mainly by the South African portfolio, better finance cost expectations, and a strong performance from the V&A Waterfront, caused a turnaround. Growthpoint upgraded its guidance to between 1% and 3%. A further upgrade in June tightened the range to between 2% and 3%.

The same factors contributing to half-year outperformance boosted second half performance. The dividend was raised after the improved performance by the SA portfolio and an increased payout ratio to 85% from 82.5%. The ratio was increased even further for the second six months to 87.5%, with an average annual payout ratio of 85%. The final dividend for the second half increased by 8.6% to 63.3 cents a share.

“Growthpoint has done well to exceed expectations. The progress made in strengthening our SA portfolio is evident in its improved performance. The V&A Waterfront again delivered standout results. Streamlining our international investments has simplified our capital structure and equity story, and disciplined treasury management kept finance costs below expectations,” said CEO Norbert Sasse.

Shifting its outlook from cautious to optimistic, Growthpoint intends to maintain its payout ratio at 87.5% for the 2026 year. Growthpoint would likely be further boosted by the tailwinds of decreasing interest rates and a growth phase taking shape in the property cycle, he said.

Total property assets stood at R155.8 billion compared to R166.2bn last year, with disposals to optimise the international investment portfolio being the main factor behind the 6.3% decrease. The Group SA REIT loan-to-value (LTV) ratio decreased to 40.1% from 42.3%. Strong liquidity was maintained, with R900 million in cash and R4.7bn in unutilised debt facilities. Finance costs in SA decreased due to lower average borrowings and a lower weighted average cost of debt.

He said they were focused on disposals, developments, and targeted investments to improve the quality of the directly held SA portfolio of logistics and industrial, office, and retail properties.

As a result of portfolio enhancement over the past decade, Growthpoint has grown its logistics and industrial assets from 15% to 20% of the total SA portfolio value. It also reduced its office exposure from 46% to 40% of portfolio value, streamlining from 186 properties to 146 by reducing exposure to B- and C-grade assets and those in non-core business nodes, and aligning its office assets more closely with modern business aspirations and operational needs.

Retail property assets were steady at 39% of the total portfolio value, but the number of retail properties has nearly halved from 61 to 32. Growthpoint has exited non-core retail in declining nodes and central business districts, and smaller, niche segments such as motor dealerships.

Growthpoint disposed of its stake in UK-based C&R to NewRiver REIT (NRR) in December 2024, receiving R1.16bn in cash and a 14.2% stake in NRR. Post-year-end, Growthpoint sold its NRR stake, raising R1.3bn, exiting its investment in the UK. Options to maximise value from its 29.6% stake in Globalworth Real Estate Investments (GWI) were being evaluated. The 63.6% stake in Growthpoint Properties Australia (GOZ) remained core.

The office portfolio achieved a meaningful turnaround in like-for-like net property income (NPI) from -1% to 6.8% growth, driven by steady letting and disciplined cost and recovery management. Vacancies reduced to 14.6%.

Growthpoint’s 50% interest in the V&A Waterfront in Cape Town has a property value of R13.3 billion, which makes up 10% of Growthpoint’s total asset book value. The V&A increased NPI by 10.4% even with the Lux Mall and The Table Bay hotel undergoing redevelopment. The V&A drew 24 million visitors.

“Key metrics are improving consistently across all three SA sectors. The V&A Waterfront is on track for double-digit growth. Reduced finance costs will continue to benefit the business,” said Sasse.

BUSINESS REPORT