SA's largest listed property company Growthpoint [JSE:GRT] has reported increased vacancies across the South African sector, with office rentals taking the biggest hit.
Office vacancies jumped 11.5% in the second half of last year, Growthpoint said.
The group, which has a portfolio of 441 directly-owned properties in SA valued at R79.2 billion, on Wednesday released its unaudited financial results for the six months ended 31 December 2019.
It has a 62.2% interest in Growthpoint Properties Australia – which includes 58 properties valued at R42.5 billion. During the period, Growthpoint acquired a 51.1% controlling interest in UK shopping mall owner Capital & Regional, listed on the London Stock Exchange. It owns seven retail properties in the UK valued at R14.8 billion.
Overall, the group's vacancies in SA rose by 7.4%, while vacancies in its Australian portfolio increased by a more modest 2.1%.
There was no change in vacancies for its Capital & Regional business, while vacancies reduced at the V&A Waterfront by 1%. Growthpoint has a 50% stake in the V&A, valued at R7.6 billion.
"The V&A Waterfront, which benefits from local and international tourism, 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 is positive for our investment returns," the group said in a statement released on the JSE Stock Exchange News Service.
Retaining tenants is a priority, Growthpoint stressed. "We are driving this through various initiatives including the UNdeposit and Smartmove campaigns, as well as Growthpoint’s occupancy cost efficient, sustainable Thrive Portfolio," the statement read.
The group said its internationalisation strategy was paying off, with offshore earnings before interest and taxation increasing from 30.3% as at the end of the 2019 financial year to 35.2%.
However, most of Growthpoint's assets still remain in SA, in terms of EBIT (75.7%) and the market value of property (64.8%) – macro-economic events will weigh heavily on property performance, the group said.
Growthpoint expects its international investments to contribute positively to the 2020's growth.
"Property fundamentals in Australia remain strong with capitalisation rates and interest rates at all-time lows," the statement read. The group expects its eastern European investments also to perform well.
According to the statement, revenue increased 1.5% to R5.7 billion, while operating profit decreased 0.4% to R4.08 billion, from R4.1 billion reported previously.
Headline earnings per share decreased 14.1% from 81.77 cents to 70.27 cents, while Net Asset Value per share declined 2% to R25.18, from R25.70.
The interim dividend declared was a mere 0.2% more at 106 cents. Shareholders have the option of reinvesting the net cash dividend in its exchange for Growthpoint shares, the statement said.
Growthpoint's share price hardly moved on the release of the results. Shares were trading at R17.71 around noon, nearly 30% lower than a year ago.
* Subsequent to the publication of this article, Growthpoint published a correction to its results. This article has been updated to reflect that its headline earnings per share decreased 14.1% from 81.77 cents to 70.27 cents, rather than increasing by 9.7%.
* Compiled by Lameez Omarjee