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Johannesburg - Growthpoint Properties reported distribution growth of 8% for the six-month interim period to the end of December 2013, outperforming original market guidance.
Norbert Sasse, CEO of Growthpoint, attributes the positive results to the solid performance from Growthpoint’s South African property portfolio.
He also cites growing distributions from Growthpoint’s 63.5% holding in Growthpoint Properties Australia (GOZ) as making a strong contribution to results, with exchange rates moving markedly in Growthpoint’s favour.
“Notwithstanding the challenging market conditions, we’re pleased to report positive performance for our investors and deliver results ahead of expectations,” said Sasse.
Growthpoint’s distributions are based on sustainable rental income. It doesn’t distribute capital profits.
“Should current economic conditions prevail, Growthpoint is likely to deliver similar growth in distributions for shareholders for the full year to June 2014,” said Sasse.
This is the first distribution that Growthpoint has made as a REIT company.
Growthpoint became the largest South African REIT on the JSE from 1 July 2013.
It also successfully converted its capital structure, from property loan stock linked units to REIT ordinary shares of no par value.
Growthpoint is a JSE ALSI Top 40 Index company. It owns and manages a diversified portfolio of 388 properties in South Africa, 49 properties in Australia through its investment in GOZ and a 50% interest in the properties at V&A Waterfront, Cape Town.
Its consolidated property assets were valued at R63.1bn.
Capital
Funds from Growthpoint’s successful R2.5bn capital raise in May 2013 were unutilised for the full interim period.
This resulted in an interest saving of R90m and a low loan-to-value ratio of 24.2% for its South African balance sheet.
At the end of the period, Growthpoint’s debt was well hedged with 86.5% of interest rate exposure fixed with a weighted average term of debt of 3.6 years, an average fixed interest rate hedge profile of 4.5 years and an all-in weighted average rate of 9.5%.
“In light of the recent increase in interest rates, our conservative debt management places Growthpoint in a good position,” said Sasse.
Growthpoint’s net asset value increased by 8.2% to R21.03 per share, driven by increasing property values, reduction in the mark to market liability of interest rate swaps, and an additional R976 million capital raised through its September 2013 Distribution Re-Investment Programme.
The change to REITs and the timing of the declaration and provisioning of the interim dividend added R1.5 billion or 79 cents to the net asset value and net asset value per share respectively.
South African portfolio
Growthpoint’s South African property portfolio contributed 74.4% to its distributable income.
Notwithstanding tough local conditions, it delivered like-for-like net property income growth of 6.4%. Vacancies remained largely stable at 4.6% overall.
In the face of continued increasing cost pressures, Growthpoint maintained its cost-to-income ratio for the portfolio at the 28% mark.
Portfolio arrears remain at low levels, with marginal bad debt write-offs.
In South Africa, Growthpoint acquired six portions of land and one industrial property for R407m and disposed of nine non-core properties for R488m, a profit of R94m on cost.
It also invested R406m in value-enhancing redevelopments and improvements.
Acquisitions
During the period it announced the acquisition of two property portfolios in Gauteng for R7.4 billion, namnely Abseq for R1.3bn at an 8.7% forward yield and Tiber for R6.1bn at a 7.7% forward yield.
Growthpoint will also acquire from Zenprop a 50% interest in a property that Tiber co-owned with Zenprop for R379m to achieve full ownership.
“Both portfolios have now transferred to Growthpoint, Abseq from 1 January and Tiber from 1 March 2014, and the full benefits of these transactions will accrue to shareholders in the 2015 financial year,” said Sasse.
“These acquisitions enhance the overall quality of our office portfolio. Over 80% of the combined portfolios now comprise Prime- and A-grade offices.”
Distributions from Growthpoint’s strategic holding in GOZ grew 13.9% in rand on a like-for-like basis, making a strong 15.3% contribution to its total distributable income.
Growthpoint achieved an average hedge rate of AUD1:ZAR9.30. Growthpoint elected to reinvest its August 2013 distributions from GOZ and participated in the rights issue during November 2013, increasing its investment in GOZ from R3.4bn to R4.3bn during the period.
Achieving acquisitive growth for the half year, GOZ acquired five industrial properties in Victoria for a total R712m. It also invested R266m in development and capital expenditure.
V&A Waterfront
Distributions from Growthpoint’s 50% stake in the V&A Waterfront increased by 4.7% on a like-for-like basis and contributed 10.3% to distributable income.
Growthpoint invested R108m in development and capital projects at the V&A Waterfront during the period.
It has also committed R437m for its contribution to new, enhancing developments, including the iconic development of the new Zeitz Museum of Contemporary Art Africa in the historic Grain Silo at the V&A Waterfront.
It is set to open in 2016 in a 9 500m², nine-storey building that preserves the original structure, and includes 6 000m² of exhibition space and an entire floor dedicated to education.
In addition, Growthpoint has a R2bn development pipeline in South Africa, which includes a 55% share in the recently announced new Discovery head office.
Growthpoint will invest R1.4bn in the development in partnership with Zenprop (45%).
The 86 000m² building will be Discovery’s hub for the growing international business that operates in South Africa, the US, UK, China and Singapore.
It will house all of Discovery’s Sandton-based employees who now work in four different buildings in Sandton central.
Share buyback
After the close of its financial year, Growthpoint entered into share buyback agreements with beneficiaries of Growthpoint’s BEE shareholders AMU Trust, Unipalm Investment Holdings and Desert Wind Property, to purchase approximately 17 million Growthpoint Shares for R365m at a price of R20.74 per Growthpoint share on an ex dividend basis.
“Growthpoint will continue to identify and pursue revenue enhancing opportunities which further our objective to deliver sustainable income distributions and capital appreciation for shareholders,” said Sasse.
Norbert Sasse, CEO of Growthpoint, attributes the positive results to the solid performance from Growthpoint’s South African property portfolio.
He also cites growing distributions from Growthpoint’s 63.5% holding in Growthpoint Properties Australia (GOZ) as making a strong contribution to results, with exchange rates moving markedly in Growthpoint’s favour.
“Notwithstanding the challenging market conditions, we’re pleased to report positive performance for our investors and deliver results ahead of expectations,” said Sasse.
Growthpoint’s distributions are based on sustainable rental income. It doesn’t distribute capital profits.
“Should current economic conditions prevail, Growthpoint is likely to deliver similar growth in distributions for shareholders for the full year to June 2014,” said Sasse.
This is the first distribution that Growthpoint has made as a REIT company.
Growthpoint became the largest South African REIT on the JSE from 1 July 2013.
It also successfully converted its capital structure, from property loan stock linked units to REIT ordinary shares of no par value.
Growthpoint is a JSE ALSI Top 40 Index company. It owns and manages a diversified portfolio of 388 properties in South Africa, 49 properties in Australia through its investment in GOZ and a 50% interest in the properties at V&A Waterfront, Cape Town.
Its consolidated property assets were valued at R63.1bn.
Capital
Funds from Growthpoint’s successful R2.5bn capital raise in May 2013 were unutilised for the full interim period.
This resulted in an interest saving of R90m and a low loan-to-value ratio of 24.2% for its South African balance sheet.
At the end of the period, Growthpoint’s debt was well hedged with 86.5% of interest rate exposure fixed with a weighted average term of debt of 3.6 years, an average fixed interest rate hedge profile of 4.5 years and an all-in weighted average rate of 9.5%.
“In light of the recent increase in interest rates, our conservative debt management places Growthpoint in a good position,” said Sasse.
Growthpoint’s net asset value increased by 8.2% to R21.03 per share, driven by increasing property values, reduction in the mark to market liability of interest rate swaps, and an additional R976 million capital raised through its September 2013 Distribution Re-Investment Programme.
The change to REITs and the timing of the declaration and provisioning of the interim dividend added R1.5 billion or 79 cents to the net asset value and net asset value per share respectively.
South African portfolio
Growthpoint’s South African property portfolio contributed 74.4% to its distributable income.
Notwithstanding tough local conditions, it delivered like-for-like net property income growth of 6.4%. Vacancies remained largely stable at 4.6% overall.
In the face of continued increasing cost pressures, Growthpoint maintained its cost-to-income ratio for the portfolio at the 28% mark.
Portfolio arrears remain at low levels, with marginal bad debt write-offs.
In South Africa, Growthpoint acquired six portions of land and one industrial property for R407m and disposed of nine non-core properties for R488m, a profit of R94m on cost.
It also invested R406m in value-enhancing redevelopments and improvements.
Acquisitions
During the period it announced the acquisition of two property portfolios in Gauteng for R7.4 billion, namnely Abseq for R1.3bn at an 8.7% forward yield and Tiber for R6.1bn at a 7.7% forward yield.
Growthpoint will also acquire from Zenprop a 50% interest in a property that Tiber co-owned with Zenprop for R379m to achieve full ownership.
“Both portfolios have now transferred to Growthpoint, Abseq from 1 January and Tiber from 1 March 2014, and the full benefits of these transactions will accrue to shareholders in the 2015 financial year,” said Sasse.
“These acquisitions enhance the overall quality of our office portfolio. Over 80% of the combined portfolios now comprise Prime- and A-grade offices.”
Distributions from Growthpoint’s strategic holding in GOZ grew 13.9% in rand on a like-for-like basis, making a strong 15.3% contribution to its total distributable income.
Growthpoint achieved an average hedge rate of AUD1:ZAR9.30. Growthpoint elected to reinvest its August 2013 distributions from GOZ and participated in the rights issue during November 2013, increasing its investment in GOZ from R3.4bn to R4.3bn during the period.
Achieving acquisitive growth for the half year, GOZ acquired five industrial properties in Victoria for a total R712m. It also invested R266m in development and capital expenditure.
V&A Waterfront
Distributions from Growthpoint’s 50% stake in the V&A Waterfront increased by 4.7% on a like-for-like basis and contributed 10.3% to distributable income.
Growthpoint invested R108m in development and capital projects at the V&A Waterfront during the period.
It has also committed R437m for its contribution to new, enhancing developments, including the iconic development of the new Zeitz Museum of Contemporary Art Africa in the historic Grain Silo at the V&A Waterfront.
It is set to open in 2016 in a 9 500m², nine-storey building that preserves the original structure, and includes 6 000m² of exhibition space and an entire floor dedicated to education.
In addition, Growthpoint has a R2bn development pipeline in South Africa, which includes a 55% share in the recently announced new Discovery head office.
Growthpoint will invest R1.4bn in the development in partnership with Zenprop (45%).
The 86 000m² building will be Discovery’s hub for the growing international business that operates in South Africa, the US, UK, China and Singapore.
It will house all of Discovery’s Sandton-based employees who now work in four different buildings in Sandton central.
Share buyback
After the close of its financial year, Growthpoint entered into share buyback agreements with beneficiaries of Growthpoint’s BEE shareholders AMU Trust, Unipalm Investment Holdings and Desert Wind Property, to purchase approximately 17 million Growthpoint Shares for R365m at a price of R20.74 per Growthpoint share on an ex dividend basis.
“Growthpoint will continue to identify and pursue revenue enhancing opportunities which further our objective to deliver sustainable income distributions and capital appreciation for shareholders,” said Sasse.
