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Growthpoint positive despite Ellerine impact

Cape Town - Growthpoint Properties [JSE:GRT] has performed well, notwithstanding South Africa’s very challenging trading conditions, CEO Norbert Sasse said on Thursday at the Cape Town presentation of the company's interim results for the half year until the end of December 2014.

He attributes the positive results to significant growth in, and a solid performance from, Growthpoint’s South African property portfolio, which contributed 65.6% to its distributable income. It delivered net property income growth of 21.2%, boosted by the Tiber and Abseq acquisitions.

This also resulted in net property income from its office portfolio reaching R1bn for the first time ever in a half-year.

Growing distributions from Growthpoint’s 64.5% holding in Growthpoint Properties Australia (GOZ), together with favourable exchange rates for Growthpoint, also enhanced distributions.

Sasse regards GOZ as well positioned to grow, with an AUD150 million war chest at its immediate disposal.

“We’ve achieved significant growth, making Growthpoint a larger, more diverse and more defensive investment for our shareholders,” he said.

“Growthpoint is likely to deliver similar growth in distributions for shareholders, of between 7.0% and 7.5%, for the full year to 30 June 2015.”

Growthpoint reported distribution growth of 7.5% for the interim period and produced an annualised total return of 29.1% for investors, with its distributable income up 29.4% from the prior half-year.

Growthpoint’s distributions are based on sustainable rental income. It doesn’t distribute capital profits.

READ: Growthpoint beats guidance to deliver growth

This is the first full six-month period that Growthpoint’s acquisitions of Abseq, Tiber and its listed investments in Acucap and Sycom have contributed to its revenue, resulting in its revenue increasing by 20.6%.

Growthpoint is the largest South African REIT and a JSE ALSI Top 40 Index company. It owns and manages a diversified portfolio of 431 properties in South Africa, 51 properties in Australia through its investment in GOZ and a 50% interest in the properties at V&A Waterfront, Cape Town.

At the close of its half-year, it also held listed investments of R5.3bn comprising a 34.6% stake in Acucap Properties and a 15.6% stake of Sycom Property Fund. Growthpoint’s consolidated property assets and investments were valued at R83.5bn.

It has a R3.2bn acquisition and development pipeline driving its immediate growth. Growthpoint has also been included in the JSE Socially Responsible Investment (SRI) Index for six consecutive years.

Ellerines impacts vacancies

Its South African portfolio vacancies increased slightly during the half-year, moving from 4.9% to 6.4%, of which around 1% can be attributed to portfolio exposure to Ellerines.

Retail vacancies are 4.4%, of which around 2% account for offices at shopping centres, and vacancies left by Ellerines. Growthpoint’s office vacancies are at 8.4% compared to the national vacancy level of 11.1%.

Industrial vacancies moved 3.0% to 5.8%, almost all attributable to three Ellerines distribution centres.

READ: Ellerine rescue going 'better than expected'

V&A Waterfront

Distributions from Growthpoint’s 50% stake in the V&A Waterfront in Cape Town, contributed 8.8% to its distributable income and net property income here showed 9.3% growth.

To meet demand, Growthpoint continues to introduce more residential opportunities in the V&A.

Growthpoint invested R173m in development and capital projects at the V&A during the period representing its 50% share. It has also committed R459.2m for its contribution to new, enhancing developments, including the Grain Silo precinct, which remains a focus.

It includes the development of the new Zeitz Museum of Contemporary Art Africa, the PwC and Werksmans office development, residential apartments for sale, a state-of-the-art Virgin Active Classic Club and a new midmarket hotel.

It will also soon house a new museum, namely the South African Golf Hall of Fame and its extended and improved Aquarium will launch later this month.

READ: V&A shows double digit retail growth again

Net asset value

Growthpoint’s conservative loan-to-value ratio was 26.9.% for its South African balance sheet. Its debt was hedged with 80.1% of interest rate exposure fixed with a weighted average term of debt of 3.5 years, an average fixed interest rate hedge profile of 4.0 years and an all-in weighted average rate of 9.4%.

Growthpoint’s net asset value increased by 3.9% to R23.01 per share. It raised an added R1bn in capital through its September 2014 distribution re-investment programme.

“Growthpoint has an exciting time ahead. Should the Acucap merger be approved, we’ll prioritise its integration. We’ll also continue to find revenue enhancing opportunities that support Growthpoint in delivering sustainable income distributions and capital appreciation for our shareholders,” concluded Sasse.

WATCH Growthpoint CEO Norbert Sasse on results.

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