Growthpoint reports solid results despite tough market conditions

In the face of challenging market conditions, Growthpoint Properties, South Africa's largest listed Real Estate Investment Trust (REIT), has managed to deliver solid results for the six-month period ending on December 31, 2021. Despite a decline of over 20% in headline earnings per share, the company saw a significant growth in total property assets, which surged by nearly 8% to reach a valuation of R164 billion. The company's Group CEO, Norbert Sasse, shared insights on the performance of Growthpoint's various business segments and locations during a recent interview on CNBC Africa. One area that performed exceptionally well for Growthpoint was the V&A Waterfront in South Africa, which experienced a remarkable turnaround as domestic and international tourism resumed. The increase in foot traffic and improved tenant performance at the V&A Waterfront contributed positively to Growthpoint's overall results. Additionally, the company's Australian business demonstrated strong performance, with record highs in key metrics such as share price and low vacancies. However, the South African portfolio faced challenges due to rising costs, vacancies, and negative reversions upon lease expirations. Despite these difficulties, Growthpoint benefited from interest savings generated by equity raised in November 2020. The UK segment of the company showed signs of stabilization, hinting at potential improvements in the future. As the global economy grapples with inflation, rising interest rates, and shrinking purchasing power for consumers, Growthpoint remains optimistic about the outlook for its assets. Sasse highlighted the resilience of the V&A Waterfront, emphasizing its ability to withstand economic headwinds and continue to perform well. While challenges persist, such as the impact of the war in Ukraine and higher energy prices, Growthpoint anticipates a return of international tourists to further boost the waterfront's performance. Regarding the office space segment, which has been affected by lockdowns and remote work trends, Sasse acknowledged a shift in demand for larger office spaces to accommodate social distancing measures. As companies encourage employees to return to the office, there is a growing preference for more spacious work environments, reflecting the evolving needs of the workforce. While remote work flexibility is expected to remain a prominent feature, the appeal of well-designed office spaces with adequate spacing is likely to drive demand. In response to a question about converting office spaces into residential properties, Sasse revealed that Growthpoint is already undertaking such initiatives, including a significant project in Bedford View. The company is exploring various opportunities to optimize its vacancies, considering options like residential conversions, storage facilities, and healthcare offerings. Overall, Growthpoint's ability to navigate challenging market conditions, capitalize on growth opportunities in key locations, and adapt to evolving trends underscores its resilience and strategic vision. As the company continues to explore innovative solutions and leverage its diversified portfolio, it remains well-positioned to deliver sustainable long-term value to its stakeholders.