Growthpoint Properties anticipates tough commercial real estate market

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GROWTH POINT Properties was in a strong financial position despite continuing uncertainty in the economy, pressures on net operating income in the South African portfolio and the ripple effect on property valuations.

The group said yesterday in a nine-month trading update through March 31 that the focus remained on strengthening the balance sheet, which would allow it to continue internationalization, optimize the local portfolio and generate new income streams from fund management and third party trading and development.

The 4.3 billion rand of equity raised last November, 577 million rand from the distribution reinvestment plan of December 2020, 827 million rand retained for the year 2020 and 499 million rand from the first half of fiscal year 2021, have all strengthened the balance sheet, said group management.

The Loan to value amounted to 40.7% as of December 31, 2020. Real estate development activity had been reduced and there had been no significant change in the activity of the Trading and Development division, compared to to that presented in the intermediate results.

In international businesses: Growthpoint Properties Australia, Globalworth Real Estate Investments and Capital & Regional, lower dividends continued to negatively impact Growthpoint earnings.

As for the impact of the Covid-19 pandemic, there had been 39 cases of corporate bailouts and liquidations among Growthpoint tenants in 2020 that resulted in arrears of Rand 124.4 million, so that in 2019, there had been only 13 cases with an impact of 6.7 million rand. . “There have only been a few so far in 2021, but more are likely to emerge once delays in processes and practitioner appointments are resolved,” the group said.

After the interim period, Growthpoint provided an additional R 54.5 million in tenant discounts as well as R 5.3 million in carry-overs, while Rand 16.9 million had been recovered from previous carry-overs.

Arrears decreased to Rand 437.9 million at the end of March 2021, from Rand 494.2 million at the end of December 2020. Some Rand 24.9 million has been forecast, bringing the total allowance for bad debts to 277.1 Million Rand as of the end of March 2021. Growthpoint has said it likely will. It will take years for absolute GDP to return to pre-Covid-19 levels, meaning real estate fundamentals in the southern sector -African would remain under pressure for 12 to 24 months.

The rise in the Business Confidence Index in May 2021 to its highest level in three years, the current account surplus in the first quarter and better-than-expected car sales were signs of green shoots in the economy, however. .

Vacant offices were at 19.5 percent. Tenants had many options when considering new premises, including subletting space from other downsizing businesses that was furnished and often furnished. The group’s largest office concentration was in Sandton, where 21.1% of gross office leasable area was located, and where the group has its greatest exposure to vacancy with around 25.4% of total office space. vacant offices.

“In Gauteng, vacancies are everywhere. The region is under much more pressure than KwaZulu-Natal and the Western Cape, where vacant housing is concentrated in one or two buildings, ”the group said.

In the retail portfolio, some categories such as supermarkets, pharmaceuticals, housewares, general value, and value fashion were recovering faster than others, but most tenants were still trading below pre-Covid-19 levels.

“Consumers remain under pressure, with rampant unemployment, low consumer confidence and high debt-to-disposable income ratios.”

Retailers in the food service, fast food, entertainment, travel and personal care categories continued to benefit from discounts, deferrals or restructuring leases.

Edcon’s arrears have been written off. Ster-Kinekor and CNA, both of which are corporate bailouts, were the largest arrears and accounted for 14% of total arrears. In the industrial portfolio, the initial sharp increase in tenant requests for rent deferrals and discounts had moderated due to the recent upturn in the economy and the associated increase in retail sales relative to baseline. low in the second half of 2020. 7.1% in the half.

At the V&A Waterfront, attendance for the nine months up to the end of March 2021 has fallen to 10.3 million visitors, down 50% from the nine months up to the end of March 2020, due to the cessation of tourism international.

Growthpoint shares closed 1.89% lower at R14.55 on the JSE yesterday.


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