JSE-listed real estate investment trust (Reit) Growthpoint Properties delivered growth in distributions a share of 4.6% in the financial year ended June 30, compared with the 2018 financial year, despite South African property fundamentals remaining weak and worsening.

Growthpoint declared a final dividend of 112.3c apiece for the six months ended June 30, taking the dividend for the full-year to 218.1c apiece. 

This was on the back of distributable income having increased by R322-million, or 5.3%, to R6.4-billion for the reporting year.

The Reit’s South African portfolio value was R78.3-billion at year-end, comprising 450 directly owned properties.

Growthpoint Properties Australia (GOZ), in which Growthpoint has a 66% stake, owned 57 properties valued at R38.7-billion as at June 30. GOZ has delivered uninterrupted dividend growth for the last ten years. Growthpoint group CEO Norbert Sasse anticipated for GOZ a 3.5% distribution growth to 23.8c apiece in the 2020 financial year.

Growthpoint also has a 29.8% shareholding in Aim-listed Globalworth Investment Holdings (GWI), which owns 60 properties in Romania and Poland, valued at €2.8-billion. GWI declared a dividend of €0.57 apiece in the reporting year, compared with a €0.49 apiece dividend in the prior year.

In the period under review, the Reit allocated R2.7-billion for developments and capital expenditure in South Africa, of which R36-million was used for acquiring an industrial property, R406-million was used for the 144 Oxford development, in Rosebank, and R321-million was used for the Lakeside 1 and 2 developments, in Centurion.

The Reit’s outstanding commitments towards South African developments include R457-million for 144 Oxford, R262-million for the Pretoria Head and Neck Hospital – which will be completed in April 2020 – and R238-million for the Bakers Transport Cato Ridge Durban development.

GOZ also has a remaining commitment of R577-million to subscribe for shares in Growthpoint Investec African Properties (GIAP), and developments totalling R959-million. GOZ acquired two office properties for R3.7-billion, or A$341-million, in the reporting year.

GIAP is a joint venture between Growthpoint and Investec Asset Management, which has raised $212-million, to date, for buying properties in Africa.

Growthpoint disposed of 14 properties in the reporting year, valued at R2.9-billion, of which the largest was the Investec building, in Sandton, for R2.2-billion. GOZ disposed of two properties for R452-million.

At the end of the reporting period, the Reit had seven South African properties up for sale, valued at R325-million.

Growthpoint had a 5.8% vacancy rate in the reporting year, compared with 4.7% in the prior financial year, across 6.6-million square meters of gross leasable area. The Reit said tenant retention remained a priority and that it was being driven through various initiatives.

Sasse on Wednesday stated that most of the group’s assets were in South Africa, where the macroeconomic environment was weighing heavily on the Reit’s ability to grow dividends for the 2020 financial year.

“Domestic tenants continued to downsize their space, which was placing pressure on all property fundamentals. The oversupply of space across the retail, industrial and office sectors was also limiting Growthpoint’s ability to grow rentals.”

The Reit’s 50%-owned V&A Waterfront property is positioned to deliver growth, but is not immune to the erosion in the domestic economy. There is, however, still demand from corporates for offices at the V&A and this was positive for investment returns, noted Sasse. 

He added that Growthpoint’s international investments, including in Poland and Romania, should contribute positively to next year’s distribution growth.

Meanwhile, Growthpoint announced on Wednesday that it intended to acquire a majority stake in UK-based Reit Capital & Regional. Growthpoint has until October 9 to make a firm offer or withdraw.

Capital & Regional owns shopping centres in the UK and plans on listing on the JSE in future. Sasse said the transaction would be in keeping with the company's strategy to expand its international portfolio, to lessen exposure to the South African property market.