JSE-listed real estate investment trust (Reit) Growthpoint Properties recorded distribution growth of 7.5% to 84.4c a share in the six months ended December 31.

Speaking at a presentation of the company’s interim results, in Johannesburg, on Wednesday, Growthpoint CEO Norbert Sasse noted that investors received an annualised total return of 29.1%, while the company’s distributable income had increased by 29.4%, compared with that of the first half of the prior financial year.

Sasse attributed the results to the significant growth in the Reit’s South African property portfolio and its strong performance.

At the close of the six-month period, Growthpoint listed investments of R5.3-billion, comprising a 34.6% stake in Acucap Properties and a 15% stake in Sycom Property Fund.

Growthpoint’s consolidated property assets and investments were valued at R83.5-billion. Further, it had a development and acquisition pipeline of R3.2-billion.

The growing distributions from Growthpoint’s 64.5% holding in Growthpoint Properties Australia (GOZ), as well as positive exchange rate movements, had also boosted distributions for the period under review.

A 20.6% increase in revenue was also achieved, owing to Growthpoint’s acquisition of Abseq and Tiber and its listed investments in Acucap and Sycom, which added to the revenue growth.

“Despite the challenging conditions in South Africa, Growthpoint has performed well and has achieved significant growth, making it a larger, more diverse and more defensive investment for our shareholders,” said Sasse.

Growthpoint was expecting to deliver distribution growth for shareholders of between 7% and 7.5% for the full financial year.

Its South African portfolio contributed 65.6% of Growthpoint’s distributable income and it also delivered property income growth of 21.2%.

This resulted in its office portfolio net property income reaching R1-billion for the first time in an interim period.

“The South African portfolio’s vacancies remain low but [were] slightly [higher in] the half-year, from 4.9% to 6.4%, of which about 1% can be attributed to portfolio exposure to furniture retail group Ellerines’ business rescue.

“Retail vacancies are 4.4%, of which about 2% accounts for offices and shopping centres and vacancies by Ellerines. Growthpoint’s office vacancies are 8.4%, below the national vacancy level of 11%. Industrial vacancies increased form 3% to 5.8%, almost all attributable to three Ellerines distribution centres,” stated Sasse.

Australian Investment
GOZ delivered a 26.4% annualised total return for the six months, a 17% contribution to its total distributable income.

Growthpoint also reinvested its August 2014 distributions from GOZ to increase the GOZ investment from R5.3-billion to R5.6-billion.

Sasse noted that GOZ was well positioned to grow with A$150-million at its disposal.

Land had been acquired for an office property development for R66.8-million and Growthpoint would develop this land and other properties totalling R790.2-million.

V&A Waterfront Investment
Growthpoint reported that distribution contributions from its 50% stake in the V&A Waterfront, in Cape Town, had added 8.8% to its distributable income, while net property growth was 9.3%.

Its retail sales saw an 18.7% growth on a rolling 12-month period to December 31, and its retail trading densities grew at 15.9%.

The precinct’s offices reported positive activity with a low 3.3% vacancy percentage. V&A Waterfront hotel occupancies and rates were rising and the fishing and industrial facilities remained fully let and reflected positive rent reversions. To meet demand, it continued to introduce more residential opportunities, said Sasse.

Further, during the six months under review, Growthpoint invested R173-million in development and capital projects at the V&A Waterfront and also committed R459.2-million for its contribution to new, enhancing developments, including the Grain Silo precinct.

Developments also include the new Zeitz Museum of Contemporary Art Africa, the PwC and Werksmans office developments, residential apartments, a Virgin Active Classic Club and a new midmarket hotel.

Increasing Assets
Growthpoint’s listed investments, comprising its stakes in Acucap and Sycom, contributed 8.6% to distributable income. Growthpoint first acquired stakes in these entities in April 2014.

In August 2014, Acucap and Growthpoint announced that they were in discussions to merge and by November 2014, an implementation agreement was signed for a potential offer by Growthpoint to acquire all the shares in Acucap that it did not already own.

Accepting the scheme, 91% of Acucap shareholders present or represented at a general meeting last month voted in favour of Growthpoint’s offer. The Competition Commission has recommended to the Competition Tribunal that the transaction be approved without conditions. The tribunal ruling was expected during the second week of this month.

“If we receive approval from the tribunal, and also from the Takeover Regulation Panel, the deal could be effective from as early as April 1. It would then be implemented on May 1, when Acucap would be delisted and become a wholly-owned subsidiary of Growthpoint,” explained Sasse.

Implementing the scheme would increase the property assets of Growthpoint by about R18-billion – about R11-billion of retail centres and R7-billion of offices – to nearly R100-billion.

Growthpoint’s South African property portfolio would grow to more than R75-billion.

The transaction would add 5% to Growthpoint’s retail weighting, bringing retail properties to 39% of the value of its portfolio, with offices at 46% and industrial assets at 15%.

“While the transaction stands to create South Africa’s largest retail property portfolio by value, we’d still like to grow our retail exposure some more, as retail is outperforming offices,” said Sasse.