Property heavyweight Growthpoint has seen its debt ranges spike 41.5% from round R49.5 billion to only shy of R70 billion by the top of its monetary yr to June 30, its latest results revealed on Wednesday present.
This has contributed to the group’s loan-to-value ratio additionally surging – to 43.9% from a way more palatable 36.7% for its 2019 monetary yr.
The influence of the Covid-19 pandemic on earnings streams and property valuations is a big headache for Growthpoint and plenty of of its friends. Nevertheless, for Growthpoint its acquisition of a majority stake in UK retail fund Capital & Regional for R2.9 billion final December has additionally contributed to the group’s a lot larger debt and loan-to-value or LTV.
To place Growthpoint’s R70 billion debt in context, it’s value noting that the group’s South African property portfolio is value R73.four billion (excluding its 50% stake within the V&A Waterfront, which is valued R7.16 billion and is handled as an fairness funding).
Growthpoint’s full-year outcomes presentation reveals that total finance prices have consequently additionally surged 19.three%, from round R2.6 billion on the finish of its 2019 monetary yr to R3.1 billion in 2020.
Regardless of the spike in its debt and LTV, Growthpoint Group CEO Norbert Sasse, talking throughout a outcomes media webcast, maintains that the property fund’s stability sheet is robust and can allow it to climate the Covid-19 crunch.
The group has opted to defer cost of its remaining dividend for the yr – to December on the newest. Nevertheless, it might pay out 75% of this and withhold the remaining to shore up its stability sheet amid pandemic strain. Most of its friends are both withholding dividends or deferring payouts.
“We always search to strike a stability between a conservatively managed and sustainable enterprise and the curiosity of our traders in optimising distributions,” mentioned Sasse.
“Whereas no remaining dividend has been declared for FY20, topic to there being no materials regulatory adjustments or market disruptions which can have a considerably damaging influence on our total monetary place between the date of publication of our outcomes, and the date of declaration of the ultimate dividend for FY20, the Growthpoint board is contemplating declaring a remaining dividend based mostly on a payout ratio of not lower than 75% of distributable earnings for FY20 which can guarantee compliance with present Reit [real estate investment trust] laws,” he famous.
That is the primary time in 16 years that Growthpoint has been unable to ship a rising dividend to its shareholders.
Sasse mentioned the outcomes had been considerably impacted by Covid-19 lockdown restrictions, largely within the remaining quarter of Growthpoint’s monetary yr to the top of June. Nevertheless, he careworn that South Africa’s economic system was already in recession earlier than Covid-19.
“By no means earlier than has Growthpoint skilled such a difficult working setting. Following an in depth strategic overview of brief and long-term methods, the Growthpoint board is prioritising liquidity and stability sheet power within the brief time period, contemplating the weak property fundamentals in South Africa particularly, and the present cycle of falling asset values and rising gearing ranges,” he mentioned.
Growthpoint has a South African, Australian, British and Jap European (Poland and Romania) property portfolio, held instantly or by way of fairness investments, value greater than R160 billion.
The group’s South African portfolio of 440 retail, workplace, industrial and healthcare properties was devalued by eight.eight% or R7.1 billion in the course of the monetary yr.
Even Growthpoint’s native trophy asset, the V&A Waterfront suffered a devaluation, with the group’s stake declining by R420 million.
Sasse conceded that Growthpoint’s total LTV was additionally impacted by the South African portfolio devaluation, nonetheless, he mentioned that the group’s Capital & Regional stake additionally took a major knock.
With the UK economic system successfully taking a double-whammy hit from Brexit and the Covid-19 fallout, he famous that Growthpoint’s 52% Capital & Regional stake is at present valued at R1.1 billion.
“Growthpoint’s consolidated LTV elevated in the course of the yr to 43.9%. The upper determine is partly as a consequence of Growthpoint’s early adoption of the second version of the SA Reit [Association] Greatest Observe Reporting tips, which features a new customary calculation for SA Reit LTV that will increase this quantity for Growthpoint by 1.7%. Utilizing the earlier calculation foundation, Growthpoint’s LTV is 42.2%.”