Our opinion on the current state of GROWPNT(GRT)Growthpoint (GRT) is South Africa's largest real estate investment trust (REIT) with a primary listing on the JSE. Prior to COVID-19, it consistently grew its dividends 3% above the inflation rate on average over the last 15 years.
The company owns 434 properties in South Africa worth R71bn. In addition, it has a 62,2% interest in Growthpoint Properties Australia (GOZ), which is listed on the Australian Stock Exchange (ASX) and owns 57 properties worth R49,8bn, and an 18,2% investment in ASX-listed Industrial REIT. It also has 4 equity-accounted investments worth R16bn, including a 50% holding of the V&A Waterfront in Cape Town, a 29,4% stake in Global Real Estate Investments listed on the London Stock Exchange (LSE), and a 21,6% interest in Global Worth Poland Real Estate (GWRE), listed in Warsaw. Altogether, Growthpoint has 59,2% of its assets in South Africa and 40,8% elsewhere.
The company has acquired a 60,8% stake in Capreg, listed in London and on the JSE, which owns 7 properties in the UK worth R14,8bn. We regard Growthpoint as a high-quality blue-chip property group and a solid long-term investment for private investors.
The company is battling with an oversupply of office space following COVID-19 and the work-from-home movement. In its results for the year to 30th June 2024, the company reported net property income up 1%, with the V&A Waterfront's distributable income up 12,6%. The company said, "High interest rates across the Group continue to negatively impact distributable income, with total cost of funding increasing by 16.2% to R4 394.0m." The company's net asset value (NAV) fell by 6,1% to 2020c per share. The group's loan-to-value (LTV) was 42,3%, up from the previous year’s figure of 40,1%.
In an update on the 3 months to 30th September 2024, the company reported retail vacancies, including office space at the centers, at 5,9% - up from the previous quarter's 5,5%. The company said, "Notwithstanding ongoing macroeconomic constraints, albeit less severe, and an oversupply of office space, particularly in Gauteng in the Sandton node, our office portfolio KPIs are showing continuous improvement, and our innovative leasing strategies are producing positive results. We successfully concluded leases of 48 269m² and renewals of 30 039m², reducing vacancies to 14.2% from 15.1% at FY24."
Technically, the Growthpoint share has been trending up for the past year and looks set to continue in that direction, especially as interest rates continue to fall. The share is still trading well below its NAV.
On 12th November 2020, the company announced that it had raised R4,3bn through an accelerated book-build in which it sold 358,3m shares for R12 each. Despite the challenges in the office space sector, Growthpoint's diversified portfolio, strong retail presence, and ongoing recovery efforts position it well for future growth.
