V&A Waterfront shines – but not bright enough
Growthpoint Properties says that V&A Waterfront in Cape Town’s performance exceeded its expectations, but the group’s overall financials have still taken a hit.
In its results for the year ended 30 June 2024, Growthpoint said that its key performance indicators improved across its retail, office and industrial sectors, which included arrears, rental reversion rates, valuations and vacancies in office and retail.
The V&A Waterfront was a standout performer due to the positive impact of increased tourism, with distributable income jumping by 12.6% to R775 million (FY23: R688.4 million)
The V&A Waterfront is a 123-hectare mixed-use property development situated along the historic Victoria and Alfred basin, which formed Cape Town’s original harbour. Its properties include office, retail, fishing, logistics, hotel, residential and industrial.
Growthpoint and the Public Investment Corporation jointly own the V&A Waterfront.
However, high interest rates across the group negatively impact distributable income, with a total cost of funding jumping by 16.2% to R4,394.0 million (FY23: R3,781.5 million.)
In South Africa, the group let gross lettable area of 1,202,259sqm, resulting in improved vacancies to 8.7 (FY23: 9.7%)
The SA renewal success rate of expiring leases increased to 76.3% (FY23: 64.9%), while negative rent reversions on renewal in SA improved significantly to -6.0% (FY23: -12.9%)
As per the group’s strategy, it aims to improve the quality of its South African portfolio.
In line with this, it disposed of 17 South African properties, including three office properties, for R907.7 million (FY23: R1.2 billion.)
It also disposed of two trading and development properties, The Kent in La Lucia, for R141.0 million and Woodburn Square, Pietermaritzburg, for R153.3 million. These sales generated a profit of R38.0 million. In FY23, one property was sold for R340.0 million, with a profit of R83.0 million.
There are also six properties valued at R580.3 million held for sale in FY24.
R2.1 billion of capex and development costs were spent over the year, including the redevelopment of Arterial Industrial, Blackheath, Bellville; Bayside Mall, Tableview; and Longkloof Studios (Hilton Canopy Hotel), Cape Town (FY23: R1.5 billion).
Financials
Overall, total group revenue increased by 4.8% from R13.7 billion in FY23 to R14.4 billion in FY24.
That said, group operating profit dropped by 2.0% to R8.7 billion (FY23: R8.9 billion).
Distributable income also declined by 10.3% to R4,813 million (FY23: R5,363 million).
Basic earnings per share also decreased by 45.9% to 37.49 cents per share (FY23: 69.24 cents), which Growthpoint said was due to negative fair value adjustments on investment property, interest-bearing borrowings and derivatives.
Basic headline earnings per share also dropped by 32.3% to 101.26 cents per share (FY23: 149.61 cents).
The group’s dividend per share decreased by 10.0% to 117.1 cents per share (FY23: 130.1 cents)
| Financials | FY23 | FY24 | % Change |
| Total group revenue | R13.7 billion | R14.4 billion | +4.8% |
| Distributable income | R5 363 million | R4 813 million | -10.3% |
| Funds From Operations (FFO) per share | 148.6 cents | 131.5 cents | -11.5% |
| Basic earnings per share | 69.24 cents | 37.49 cents | -45.9% |
| Basic headline earnings per share | 149.61 cents | 101.26 cents | -32.3% |
| Dividend | 130.1 cents | 117.1 cents | -10.0% |
Outlook
“High interest rates will continue to impact the real estate sector and our domestic operations and offshore investments. While global political uncertainty remains a concern, the political landscape in South Africa is showing signs of improvement after the May elections,” said the group.
“Our focus will remain on improving the quality of our South African portfolio, with emphasis placed on capital allocation, proactive tenant retention strategies, strategic repositioning efforts, fostering green building initiatives, leveraging renewable energy solutions and focusing on higher growth sectors.”
With interest rate cuts expected to occur next week, the two-pot system’s introduction, no load shedding since March, and a decline in fuel prices, there are positive signs for the South African consumers. The group said that these positive developments could boost the retail sector.
“The improving perception of the SA political landscape could, over time, lead to a more favourable environment for the Office sector, which continues to suffer from oversupply in Gauteng. The sector does, however, seem to have stabilised and has normalised in Cape Town and Umhlanga Ridge.”
“The Logistics and Industrial sector, benefiting from a more balanced supply-demand dynamic, is expected to outperform other sectors. We also anticipate that KwaZulu-Natal and the Western Cape will continue to deliver superior performance.”
Although the V&A Waterfront’s performance exceeded expectations for FY24, driven by increased
domestic and international tourism, the redevelopment of Lux Mall and Table Bay will have a negative impact on FY25’s performance.
Both redevelopments are set to open towards the end of 2025, and the V&A Waterfront anticipates mid-single-digit growth for FY25.
“International expansion is constrained by our high cost of capital, both domestically and offshore, particularly as we are committed to balance sheet strength. Consequently, we shall continue to focus on optimising our existing investments.”
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