Real estate investment trust Growthpoint Properties announced a 6.5% distribution growth for the year ended June 30, with a final dividend of R1.07 apiece declared, despite weak economic conditions and a competitive market in South Africa.
Growthpoint South Africa CEO Estienne de Klerk pointed out that the property market is the toughest it has ever been, with lack of growth in the industry, lack of investor and policy confidence and owing to it being highly competitive. This is in addition to the trend that companies are reducing office space (from about 20 m2 per employee to 12 m2 per employee), also as a function of the weak economy.
Nonetheless, the company’s distributable income exceeded R6-billion for the first time, with the yearly distribution rate increasing by 10.1%. Growthpoint’s property assets increased by 8.7% to R132-billion, with most of the growth coming from the company’s international activities, which are currently focused in Australia, Romania and Poland.
Growthpoint’s international footprint accounts for 27.7% of its assets by book value and for 20.5% of its earnings before interest and tax. The company wants to raise the footprint to 30% by the end of 2020.
Growthpoint Properties group CEO Norbert Sasse also attributes the company’s strong performance to contributions from its investment in Central and Eastern Europe and the V&A Waterfront, in Cape Town.
“Growthpoint is set for another year of dividend growth ahead. However, taking into account the concerning and persistently weak economy that has permeated domestic property fundamentals, its growth in the dividend a share for the financial year ending June 30, 2019, will be about 4.5%, subject to no unforeseen circumstances arising,” he noted.
Growthpoint let more than a million square metres in its South African portfolio and achieved vacancy levels below industry benchmarks. Even so, its vacancies crept up from 4.4% to 5.4%. Growthpoint is still achieving 7.4% average future escalations on rentals and the overall expense ratio of its domestic portfolio remained under control at 27.5%.
“For the first time, key metrics in all three of its South African sectors weakened in tandem with the tough economy and depressed property cycle. Even in a fiercely competitive market the quality of Growthpoint’s portfolio ensured a solid performance overall,” remarked Sasse.
Growthpoint has developments in progress totalling R1.6-billion, which includes the office building on 144 Oxford Street, Rosebank, totalling R524-million, and Exxaro’s head office, in Centurion, totalling R333-million. The 144 Oxford Street development is expected to be completed by the fourth quarter of 2019.