GROWTH POINT REPORTS MIXED PERFORMANCE AS LOAD SHEDDING WEIGHS, V&A WATERFRONT IS BOOMING

Growthpoint, South Africa’s largest listed property group and co-owner of the V&A Waterfront, announced on Thursday that load shedding, a scheduled electricity cut, had contributed to a mixed performance in its diverse portfolio during the nine months ending in March. The company continued to experience double-digit rental reversions, but it was encouraged by positive leasing activity.

The impact of load shedding on both Growthpoint and its tenants resulted in significant costs, with diesel expenses reaching R87 million, representing an increase of R40 million in the third quarter alone.

Although vacancies slightly increased to just over 10%, the company noted a gradual improvement in negative rental reversions upon renewal. These reversions decreased from a 16% decline in the previous half-year to just over 14%.

In the office portfolio, rental reversions improved by almost a percentage point to a decline of 19.8%. Growthpoint mentioned that it observed a return in demand in specific regions, such as Rosebank in Gauteng, as well as in the Western Cape and KwaZulu-Natal. Overall, the vacancy rate remained steady at approximately 20%.

Within its retail portfolio, rental reversions improved from a decline of slightly over 13% to just over 11%, and this trend is expected to continue until the end of the year. However, the company cautioned that retailers faced additional challenges due to load shedding and higher interest rates. Consumers continued to prioritize value offerings and essential purchases.

Growthpoint, valued at nearly R42 billion on the JSE, held property assets worth R174 billion as of December. Over 56% of its property portfolio consisted of South African assets, including the V&A, with the majority located in major metropolitan areas. The company also had interests in the UK, Australia, Poland, and Romania.

In South Africa, Growthpoint’s retail assets were valued at approximately R25 billion, office assets at R26 billion, and industrial assets at R12 billion. Its stake in the V&A was valued at R5.9 billion.

The V&A Waterfront, despite economy-wide challenges like load shedding and above-inflation cost increases, experienced a rapid recovery from the pandemic-induced downturn. The increase in international tourist arrivals by 133% compared to pre-pandemic levels significantly contributed to this recovery. Operating profit rose by 23%, surpassing pre-pandemic figures by 5%. Rental relief provided to hospitality tenants decreased by 82% compared to the same period in the previous year.

The V&A saw a boost in retail sales, visitor numbers, and hospitality due to increased international tourism, the introduction of new direct flights to Cape Town, and the resumption of conferences, sports events, and other gatherings. Retail sales exceeded pre-pandemic levels by 30%, reaching a record high of over R1 billion in December 2022, despite foot traffic not fully recovering.

The V&A Waterfront reported a negligible vacancy rate of 0.4% across the precinct and experienced exceptionally high demand for office space. The successful re-letting of all stores and restaurants that had closed during the pandemic resulted in an improved retail tenant mix.

Growthpoint’s shares declined by almost 3% in late morning trade and have fallen slightly over 6% over the past year. Further details about the group’s shares and other information can be found by clicking here.