Growthpoint Properties says it remains on track with its strategic initiatives, demonstrating resilience amid challenging market conditions.
The group said in a trading update for the three months ending 30 September 2024, that its ongoing strategy remains focused on two core areas: optimising its South African portfolio and expanding internationally.
The company is targeting R2.8 billion in asset disposals for the 2025 financial year to reduce exposure to the office sector, while reinvesting R2.2 billion into its core portfolio to enhance value through active asset management and sustainability initiatives.
Notably, the group is prioritising logistics and retail assets, especially in the Western Cape.
On the international front, Growthpoint has seen positive progress with its investments in Capital and Regional (C&R) and Growthpoint Properties Australia.
The company also continues to support shareholder value unlock initiatives at Globalworth Real Estate Investments.
Growthpoint's South African portfolio has seen a significant reduction in vacancies, which improved from 8.7% at the end of FY24 to 8.2%.
Leasing activity was strong during the quarter, with 339,204m² of space let, including 209,374m² in renewals and 129,830m² in new leases. Notably, the renewal rental growth rate showed improvement, moving closer to positive territory.
In the retail sector, the vacancy rate increased slightly to 5.9% from 5.5% at FY24, due to reduced renewal success at some Gauteng malls.
However, the overall retail trading density grew by 5.3%, and rental reversions improved, indicating a stabilising retail environment.
The company also sold Mark Park Shopping Centre for R253.9 million as part of its strategy to exit deteriorating CBD areas and increase investments in coastal regions, particularly the Western Cape.
The office sector saw vacancies decrease to 14.2%, down from 15.1% at FY24, despite challenges from an oversupply of office space.
Notably, Growthpoint's leasing strategies are showing positive results, with rent reversions improving significantly from -14.8% at FY24 to -4.0%. Coastal regions continued to perform well, with KwaZulu-Natal reporting vacancy rates of under 1%.
In the logistics and industrial sector, vacancies dropped to 4.5%, largely due to successful leasing of speculative developments. The Western Cape and KwaZulu-Natal regions recorded exceptionally low vacancies. Rental reversions for the sector improved, turning positive at 1.7%.
Growthpoint maintained disciplined capital management, funding targeted capital expenditures through retained earnings from its 82.5% dividend payout ratio and proceeds from property disposals.
The company transferred five non-core properties for R404.8 million, slightly below book value, and signed sale agreements for an additional R2.5 billion in properties.
Notably, they invested R528.6 million in developments and capital projects during the quarter, including R120.9 million for Growthpoint Investment Partners (GIP).
The V&A Waterfront in Cape Town continues to outperform expectations, with earnings before interest and tax (EBIT) rising by 20% year-on-year. Strong demand for office space, low vacancies, and a steady increase in retail sales contributed to this growth.
The precinct's hotel sector also saw significant gains, with average daily rates rising by 35%. International passenger arrivals at Cape Town International Airport increased by 11%, bolstering retail and tourism activity.
Notable developments include the ongoing construction of the Union Castle Building and a desalination plant. The Waterfront also saw strong interest in its residential offerings, with 57 of 99 apartments at 5 Dock Road already sold.
Growthpoint's Q3 2024 performance reflects its effective portfolio management strategies, with growth across key sectors.
While high interest rates continue to pose a challenge to distributable income per share (DIPS) growth in FY25, the company remains optimistic about a return to positive DIPS growth in FY26.
The company’s half-year results for the six months ending 31 December 2024 are set to be released on 12 March 2025.
Shares in the group are up 27% over the past year.
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