Growthpoint Properties has posted its investor update for the three months ended September 2024 highlight an improvement across its SA portfolio.
Vacancies improved to 8.2% from 8.7% in FY2024 with a total of 339 204m2 space let including 209 374m2 of renewals and 129 830m2 of new lets. Renewal rental growth rates also showed improvement from -6% at FY2024 to -0.4%. However, the Group’s lease renewal success rate reduced from 76.3% to 72.8%.
The REIT’s retail vacancies, including office space at centres, increased slightly from 5.5% at FY2024 to 5.9% mainly due to a 9.4% decrease in its renewal success rate to 77% as a result of non-renewals in its Gauteng portfolio. Its core retail vacancies currently sit at 4.6%.
Growthpoint sold Mark Park Shopping Centre in Vereeniging for R253.9 million as part of its strategy to exit retail in deteriorating CBDs with a further two assets awaiting transfer for R521.3 million – a motor dealership for R128 million and a small retail asset for R49.3 million.
The Group concluded leases of 48 269m2 and renewals of 30 039m2 in its office portfolio, reducing vacancies to 14.2% from 15.1% at FY2024 – the first quarter post-Covid-19 where Growthpoint says it has not seen tenants reducing space.
Rent reversions improved from -14.8% at FY2024 to -4% (which reflects only a three-month period as the Group says it expects rent reversions in the mid-to-high single digits at yearend). The lease renewal success rate moved from 62.1% to 54.7% due to two leases of c.24 000m2 that were not renewed, accounting for 45.3% of the leases that expired during the period.
Growthpoint says its coastal regions continue to outperform the rest of its office portfolio with vacancies in KwaZulu-Natal of less than 1% while the Western Cape improved from 5.3% to 5.1%. The overall vacancy reduction arose primarily from its inland portfolio where vacancies decreased from 19.3% to 18.1%.
The Group sold two B-grade office assets in Gauteng during the period for R98.8 million and converted the Pavilion Office Park in Rivonia into sectional title office space which was sold for R20.8 million. A further two office assets have been approved for disposal for a combined R230 million with sales agreements signed for an additional seven B-grade and C-grade properties for R623.8 million. Growthpoint also sold 151 on 5th in Sandton to a residential developer for R78 million.
In its Cape Town office portfolio, the R420 million Hilton Canopy Hotel at the Longkloof mixed-use precinct is nearing completion and set to launch mid-December 2024 with the green renovation of 36 Hans Strijdom in the Foreshore, supported by a 15-year lease with Ninety One, is expected for completion by June 2025.
Vacancies in the Group’s industrial and logistics portfolio improved from 5% at FY2024 to 4.5% due to the leasing of new speculative developments. Its coastal assets reported low vacancies, with KwaZulu-Natal’s vacancies reducing to 0.7%, and the Western Cape at 1.4%. Vacancies also decreased in Gauteng from 7.2% to 6.5%.
Tenant retention reduced from 78.3% to 77.2% with rental reversions increasing from -3.3% to 1.7%. The Western Cape portfolio achieved positive rental growth of 8.8% on rental renewals with Gauteng and KwaZulu-Natal recording a negative -1.8% each.
Growthpoint sold and transferred two older industrial assts for R52.1 million and signed sales agreements for 12 additional properties valued at R1.1 billion. A further five industrial assets totalling R212.1 million are for sale.
The V&A Waterfront’s EBIT (earnings before interest and tax) grew by 20% compared to the same quarter in 2023, driven by the completion of the development of Investec, the Helistop, Timeout Market and the conversion of two previously leased hotels, the Commodore and Portswood Hotels, into V&A-operated hotels with management outsourced to Legacy. The two new V&A-operated hotels increased the share of operational income to total hotel income of approximately 40% as of 30th September 2024.
The Group says that strong demand for office space in the precinct and near-zero vacancies contributed to its performance during the three months as well as a continued rise in retail sails which in turn, boosted retail turnover rental.
Total nominal SA debt reduced from R40.4 billion at FY2024 to R40.3 billion predominantly due to the strengthening in the Rand against the Euro and US Dollar. This was offset by issuing a R750 million ten-year listed private placement bond in July 2024 at three-month JIBAR plus 1.83%, reduced by a partial R700 million early redemptions of unlisted bonds.
Growthpoint has access to R6.2 billion of unutilised facilities as of 30th September 2024 with a focus on refinancing the R2.8 billion of bonds set to mature in FY2025.
