JSE-listed real estate investment trust (Reit) Growthpoint Properties increased its gross revenue by 26.1% and raised its asset value to R112.5-billion in the year ended June 30.
 
It boosted its yearly distributions to shareholders by 19.8%, with distributions above R5-billion for the first time.
  
Growing distributions from Growthpoint’s 65.5% holding in Growthpoint Properties Australia (GOZ) positively impacted on its results, amplified by slightly improved exchange rates and effective currency hedging.

A significantly improved performance from the V&A Waterfront also had a positive effect.
 
“Volatile financial markets, an increasing interest rate environment, depressed local and global growth and soft property demand dynamics created an extremely difficult operating environment,” CEO Norbert Sasse said on Thursday.
  
The company’s South African balance sheet remained well capitalised and it kept gearing at conservative levels, decreasing from 32.1% to 30.5%. Some 86.6% of Growthpoint’s debt is fixed for 3.4 years on average.

Growthpoint’s South African portfolio contributed 75.9% to its total distributable income, achieved revenue growth of 28.7% and maintained occupancy levels at 94.3%.

It achieved a total letting success rate of 82.4%, leasing 1.5-million square metres of commercial property space and reporting a renewal success rate of 68.7%.

“We focused on strategic issues, successfully bedding down our major transaction and integrating 160 new employees across all structures, with minimal disruption to the business as a whole. We also established a new vision, mission and values and identified various strategic initiatives.”
 
Growthpoint invested R2.4-billion in developments and improvements to its South African portfolio.

It also acquired assets for R840.5-million, disposed of R1.1-billion of noncore properties, and committed R1.7-billion to future developments.
 
Revenue from the V&A Waterfront contributed 8.5% to Growthpoint’s total distributable income, and was up 16.6% from the prior year.

Its improved performance was driven by a 13% increase in trading densities and 22% year-on-year sales growth from retail, owing to the weaker rand, increased tourism and an enhanced tenant mix.

Overall vacancies reduced further from 2.6% to 1.4% and it achieved a total letting success rate of 90.3%.
  
GOZ delivered a 7.4% total return to shareholders on the ASX. Dividend contributions from GOZ grew 17.1% in rand terms, compared with the same period last year, with GOZ contributing 15.2% to Growthpoint’s total distributable income.
 
After becoming a constituent of the ASX200 last year, the trading, liquidity and institutional appetite for the GOZ share improved significantly. Growthpoint invested an additional R398-million into GOZ during the year by reinvesting its distributions.
 
GOZ made acquisitions of R3.4-billion during the year, invested R441.3-million in development and capital projects and committed a further R496.7-million to investments.
  
Looking at the company’s prospects in South Africa, Growthpoint expects stable property fundamentals within a weak macroeconomic environment, limited growth and the potential for a sovereign debt downgrade.
 
“This presents the opportunity to grow the contributions to Growthpoint’s non-South African distributable income from our internationalisation strategy, funds management and through trading and development,” Sasse said.
 
GOZ expects to grow its distributions per share in Australian dollars at 3.9% in 2017. The strong property fundamentals in Australia represent positive yields and yield spreads, and good opportunities exist for GOZ to make accretive acquisitions, even in a competitive investment market.
 
“For Growthpoint, GOZ represents seven years of experience growing a successful business in a first-world economy. It has done well for us as another stable, good-quality income stream and we will continue to support and encourage its increased pace of growth,” Sasse noted.
 
V&A Waterfront’s strong property dynamics support continued growth, with significant development in the Silo and Canal precincts converting to revenue-generating investments.
 
With the combined effects of these drivers and strategic objectives, Growthpoint expects to achieve dividend growth for the coming year at a similar level as in 2016.