Reit giant felled by Covid pain
Heavyweight Growthpoint has taken a huge knock. The worst part: a recovery is not on the cards anytime soon
The grim set of results released by Growthpoint Properties last week is a stark reflection of the extent to which Covid, coupled with an economy that’s fallen off a cliff, has decimated profits in the commercial property sector.
As the JSE’S largest and most diversified SAbased real estate investment trust (Reit), Growthpoint is regarded as a reliable bellwether of the general state of SA’S retail, office and industrial property market.
The picture is not pretty — and it’s Growthpoint’s very diversification that has been its undoing.
As group CEO Norbert Sasse, known for calling it like it is, puts it: “The SA economy is in deep, deep, deep trouble. Income is under pressure on all fronts.”
In light of the dire situation the SA economy finds itself in, Sasse says Growthpoint isn’t paying a dividend now. “And neither are we giving any guidance on what shareholders should expect next year.”
However, Sasse remains committed to paying a dividend in some form or other by December, in line with JSE legislation which requires Reits to distribute at least 75% of profits to shareholders within six months of their year-end.
The company, which owns a sprawling R167bn real estate portfolio spanning SA, Australia, the UK and Eastern Europe, has taken a hefty knock on
both the income and capital growth front for the 12 months to end-june.
Nearly R1bn was wiped off distributable income, while the SA property portfolio was devalued by more than R7bn. That’s pushed loan-to-value levels from 36.7% to 43.9%.
While Growthpoint’s dividend income from its offshore investments was cut, the bulk of its losses relates to rental discounts and deferrals given to SA tenants to help keep shops and other businesses afloat during the second-quarter lockdown.
A dramatic spike in arrears (up from R77.7m to R511m in the 12 months to end-june) further contributed to Growthpoint’s woes, and underscores how many distressed SA tenants are now struggling to pay their rent.
Vacancies in the SA portfolio jumped from 6.8% to 9.5%.
And more bad news is seemingly in the offing as Sasse expects rental arrears and vacancies to continue to rise over the coming months, with more companies likely to follow the Edcon group and others into business rescue. “The unfortunate reality is that some tenants won’t make it, despite rental deferments and discounts,” he says.
It’s well reflected in Growthpoint’s share price — down 38% year to date, in line with the sector. Over three years, Growthpoint has given a return of –52%.
Not even Cape