Growthpoint sells shares to trim debt

Growthpoint Properties plans to raise about R4 billion through the issue of new shares so it can pay down debt. Due to the ongoing impact of Covid-19 it wants to reduce its leverage and maintain a strong balance sheet and also have the flexibility to have cash for development and investment activities.

The real estate investment trust said the accelerated bookbuild represented about 10% of its issued share capital. As part of its new capital plan, it said it had postponed some development activities to save costs and would dispose of R1 billion to R1.5 billion of non-core assets within its SA portfolio this year, with further disposal opportunities being reviewed. While it had been able to maintain dividend payout ratios of close to 100% of distributable earnings in recent years, it said its policy would now be to pay out at least 75% after taking any ongoing capital and funding commitments into account.

Following the share placement, Growthpoint said its loan-to-value (LTV) would decrease from 43.9% to about 41.5% on a pro forma basis. Its debt covenant remained strong, with its strictest LTV covenant being 55%.

In a separate first-quarter investor update, it reported low new letting levels for its SA office portfolio as tenants waited to assess the impact of the pandemic before committing to new office space. Its retail tenants were all open and trading by the end of September, with restaurants, cinemas and gyms still subject to some operational restrictions. It renewed 83.5% of the floorspace that expired during the quarter. Industrial tenants were also reevaluating their strategies and cutting costs to remain sustainable, while some had been liquidated or gone into business rescue after succumbing to the combined effects of the lockdown and the ailing economy.

Visitors to the V&A Waterfront in Cape Town increased significantly over the quarter, with footfall over weekends reaching around 65% of normal levels and about 60% during the week. However, it said the lack of international tourism continued to have a material impact on the hospitality and tourism sector, impacting the V&A’s hotels, high-end retail stores, restaurants, tourism-focused retailers, leisure and attractions.

Growthpoint said it gave a further R50.4 million in discounts to tenants as well as an additional R19.3 million in deferrals while R66.2 million of deferrals were recovered during the quarter. Highlighting the pressure that its tenants were under, it said tenant arrears increased to R594 million at the end of September from R511 million at the end of June.

While the South African context remains extremely tough, the diversified nature of our business and the geographies in which we operate have been buffers for us,” Growthpoint said. “Our Australian and Eastern European investments in particular are performing better given GOZ has no exposure to retail assets, GWI’s retail exposure is negligible, and both benefit from very strong tenancies.”
Due to the second hard lockdown in the UK, Growthpoint said Capital & Regional, its pure retail investment in the UK, would continue to be impacted by the challenging retail environment.

Its shares rose 8.5% to R13.74 yesterday. The announcements were made after the close of trade.

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