JSE-listed Growthpoint Properties’ distributable income, on a per share basis, declined by 19.1% to 148.1c for the financial year ended June 30, mainly as a result of 408-million new shares having been issued in an oversubscribed equity raise of R4.3-billion in November last year.
During the same period, Growthpoint delivered 6.2% growth in revenue and R5.1-billion in distributable income.
The new equity combined with strategic South African asset sales of R559-million and R864.8-million being retained for the 2021 financial year after income tax, in line with an 80% pay-out ratio, added R6.3-billion to Growthpoint’s liquidity. This significantly strengthened its balance sheet.
The positive outcomes of Growthpoint’s focus on liquidity and balance sheet strength are evident in the decrease in its consolidated South African real estate investment trust (Reit) loan-to-value (LTV) from 43.9% to 40% during the year, with its South African LTV reducing from 39.8% to 35.1% and interest cover ratio (ICR) of 3.2x, group CEO Norbert Sasse says.
Growthpoint achieved these healthy LTV levels despite a further 7.4% devaluation of its South African portfolio, which has decreased in value by 16.2% since Covid-19 was first identified in South Africa.
Over the past two financial year-ends, Growthpoint’s South African portfolio value has been written down by R12.5-billion as a consequence of poor property fundamentals driven mainly by income uncertainty from the country’s economic challenges.
Growthpoint’s South African portfolio performance improved slightly in 2021, mainly owing to fewer Covid-19 discounts and deferrals and the reversal of R85-million in bad debts previously provided for.
Performance in South Africa was hindered by the substantial disruption to economic and social activity by the extended Covid-19 lockdown periods, changing restrictions and forced work-from-home.
Growthpoint has granted R475-million in discounts and R191-million in rental deferrals since the beginning of Covid-19 in April 2020 - a massive contribution by Growthpoint in order to sustain its tenant base and support the South African economy.
Growthpoint achieved a 99.7% average rental collection rate for its South African portfolio, and recovered R173-million, or 90.1%, of total rental deferrals granted since the onset of the pandemic.
The South African retail property portfolio recorded a 1.9% increase in trading densities, driven by strong performance from supermarkets, home décor, electronics and value fashion stores. Smaller and community centres outperformed others in the portfolio.
However, it saw a 3.7% decrease in like-for-like net property income owing to higher vacancies, significant negative rental reversions, Covid-19 rental relief of R147-million in discounts and R4-million in deferrals and lower parking revenue.
Business rescues, particularly that of Ster Kinekor and CNA, are adding to the challenges.
Demand for online retail surged from retailers and online delivery aggregators, with some services supporting in-store trading, such as Checkers Sixty60, Woolworths Dash, Dis-Chem and OneCart. Growthpoint’s centres are adapting and providing facilities to support online retail.
The contraction of the domestic economy has had a significant impact on the office sector.
Growthpoint’s South African office portfolio saw renewal successes improve somewhat, but vacancies rose from 15.4% to 19.9%, primarily in Gauteng and the Sandton area, owing to business failures, space downsizing and slow letting stemming from uncertainty.
Offices recorded a 9.8% decrease in like-for-like net property income owing to the increased vacancy level, an oversupply of space, negative rental renewal growth, and Covid-19 rental relief of R33-million in discounts and R8-million in deferrals.
Growthpoint’s industrial portfolio continued to outperform relatively, delivering steady performance with slightly improved like-for-like net property income of -0.9%, and arrears halved. Despite vacancies increasing from 7.1% to 9.4%, mostly owing to an upward trend in business failures, it reported steady escalations, but renewal success and growth rates decreased.
Growthpoint said on September 15 that it remains focused on modernising its industrial portfolio and selling noncore industrial assets, especially as there is currently market demand for industrial properties.