Growthpoint Properties, South Africa’s biggest REIT, reported a 10% decline in dividend to 117.1 cents a share in the year to June 30 and it only expects a return to positive dividend growth in 2026, when it believes the global interest rate cycle will have turned.
Distributable income per share (DIPS) decreased 10% to 141.9 cents per share, which was positive only in that it was at the lower end of the 10% to 12% guidance provided for the year.
Group CEO Norbert Sasse said in an online presentation they expected a further 2% to 5% decline in dividend in the 2025 financial year due to the high global interest rate environment, and expectations of lower income from some of its investments.
For instance, GOZ had forecast a 5% to 7% decline in dividend for 2025, and Growthpoint also expected negative dividend growth from Globalworth Real Estate Investment (GWI), while income growth from Capital & Regional (C&R) was expected to be “flattish, stable”.
Growthpoint holds 63.7% of GOZ, which in turn owns 57 office and industrial properties in Australia. The group also owns 68.9% of JSE- and LSE-listed Capital & Regional (C&R), which holds six community shopping centres in the UK valued at R9.2 billion. Growthpoint also has a 29.5% stake in LSE AIM-listed Globalworth Real Estate Investment (GWI), and the group owns an interest in 59 office and mixed-use properties in Poland and Romania, with its effective share valued at R15.1bn.
Sasse said they had to pay more than R600 million in additional interest costs through the year. In contrast, the decline in distributable income amounted to R550m, of which the finance cost contribution of the South Africa portfolio only amounted to a negative R381m.
The group’s offshore investments, which make up some 42% of the group’s R178bn of property assets, contributed 32.4% to distributable income per share, although in rand terms, offshore income declined 1.1% to R1.56bn.
He said the property cycle in South Africa appeared to be turning up. Their local and international assets reported “robust operational results” for the year, with a particularly strong performance from the V&A Waterfront, driven by local and international tourism growth above South African industry trends, while there was an improved contribution from C&R.
However, the good operational performance was overshadowed by the negative impact of higher interest rates, lower dividends from GWI and reduced profit from the South African trading and development division, leaving distributable income down 10%.
He said there was a greater sense of positivity in South Africa, which had resulted in a rise in foreign investment in bonds and equities and would become more evident in the property sector as higher interest rates started working their way out of debt-servicing costs.
“Nevertheless, the refinancing of interest rate swaps and cross-currency interest rate swaps at significantly higher rates continues to remain a challenge for earnings growth.”
Growthpoint’s loan-to-value (LTV) ratio was 42.3% (FY23: 40.1%).
“We believe LTVs, linked to valuations, are stabilising, other than possibly for GOZ where interest rates are lagging. We will continue to focus on strategic initiatives to preserve liquidity and balance sheet strength. This supports us in our key goals of enhancing the quality of the SA portfolio and optimising our international investments,” said Sasse.
Growthpoint had R465.9m cash on its SA balance sheet and R6.3bn in SA in unutilised committed debt facilities.
Sasse said GOZ remained a core investment and options were being evaluated to maximise the value of its investments in C&R and GWI.
In South Africa, Growthpoint owns 345 retail, office, and logistics and industrial properties. Vacancies improved to 8.7% from 9.7%, with even office occupancies improving materially in Sandton.
The Cape Town and KwaZulu-Natal portfolios in all three commercial property sectors are nearing full occupancy.
Growthpoint has two demand-driven developments under way in its office portfolio. One is redevelopment at 36 Hans Strydom in Cape Town for Ninety One, and it is developing a 154-room Hilton Canopy Hotel in the Longkloof precinct in the same city, set to open in December 2024.
BUSINESS REPORT