Burstone Group has published its H1 2025 results in line with guidance, following recent shareholder approval of the sale of an 80% stake in its Pan-European Logistics (PEL) platform to Blackstone.
During the half-year, the Group made progress in executing various other strategic initiatives which are anticipated to deliver results during the second half of the year including Irongate’s conclusion of a new industrial JV, backed by a leading global alternative asset management firm. The transaction has increased Irongate’s third-party equity assets under management from A$490 million at FY2024 to c.A$628 million (up 40% since acquisition).
Burstone is also currently in exclusive negotiations for a co-investment opportunity and ongoing management of a €170 million German light industrial and last mile logistics platform as well as with cornerstone investors in SA to seed and aggregate to scale an ‘SA Core plus platform’.
“The Group is pleased with the progress made in its strategic repositioning of the business into an integrated international real estate investor and funds and asset manager. Significant traction has been achieved in expanding the fund and asset management segment of our business, underpinned by several key transactions that establish a strong foundation for scaling these platforms further. The Group’s hybrid business model stands out as a key differentiator, enabling the Group to deliver enhanced returns on capital deployed. The Group is positioned for growth and will look to take advantage of several opportunities across its business to continue to grow its funds and asset management business,” comments CEO of Burstone, Andrew Wooler.
Post the implementation of the Blackstone transaction, the Group’s adjusted loan-to-value (LTV) ratio is expected to reduce to c.33.5% (March 2024: adjusted LTV of 44%) with look-through gearing to reduce from 58% to c.41%.
Its SA portfolio delivered a marginal decline in like-for-like net property income (NOI) of 1.2% with the PEL portfolio delivering a 1.1% increase in like-for-like NOI in EUR (up c.8% in ZAR).
Its local assets benefited from strong letting (222 632m2) with notable long dated leasing achieved in its industrial segment. Both its retail and industrial portfolios continued to post positive NOI growth while its office portfolio was impacted by ongoing negative rent reversions.
Reversions across its SA portfolio amounted to -8.4% (September 2023: -12.2%).
Its PEL portfolio’s gross rental growth was driven by positive rental reversions (+10.2%), good letting and renewal activity (46 554m2) – c.3.4% indexation across the portfolio. Burstone re-let/renewed 95% of space with vacancies remaining low at 3.1% (March 2024: 2.2%; September 2023: 0.9%).
Fee income grew by 54.5% during the period to R34 million (September 2023: R22 million), amounting to 8.5% of distributable earnings (September 2023: 5.4%). The Group’s expenses reduced by 5.2% with its PEL platform contributing c.€0.5 million in cost savings.
Overall Group financial performance was dampened by higher funding costs with financing costs increasing by c.R40 million with capex increasing during the period.
Distribution income per share (DIPS) decreased by 3% to 49.53 cents per share (September 2023: 51.07 cents per share) in line with market guidance.
Burstone refinanced R6.6 billion of SA and European debt in August 2024 which has improved its margin, extending its debt profile. It continued with its capital recycling programme with c.R0.3 billion of sales unconditionally concluded during H1 2025 with a further c.R0.3 billion awaiting transfer.
The Group expects further assets sales to amount to between c.R1.0 billion to c.R1.2 billion over the next year.
“The Group will continue to assess several opportunities to fund its growth strategy and decrease reliance on its balance sheet including continued asset recycling, the development of its South African fund management strategy and the introduction of LP capital partners to co-invest alongside Burstone. We will continue to seek to deploy capital into the best international/local opportunities that will support our longer-term strategic plan and continue to create shareholder value. As we look to deploy capital into growth opportunities in our fund and asset management platforms, we expect near term LTV to be between 34% to 36%, whilst we target a longer-term LTV of below 35%.”
