Growthpoint, the largest South African primary JSE-listed REIT, has released its results for the six months to December 2021. With a portfolio of 421 directly owned properties in South Africa and stakes in healthcare and student accommodation funds, it’s a great barometer for the overall property market in South Africa (other than one-bedroom flats in Fourways).

Growthpoint also has substantial investments in Australia and in London. The value split is 56.9% South Africa and 43.1% offshore.

Perhaps the most iconic investment is a 50% stake in the V&A Waterfront, which suffered a significant write-down in value in this period as Covid restrictions continued to bite. The beautiful property is highly reliant on tourism.

The overall property sector staged a huge comeback in 2021 after a terrible time during the worst of the pandemic. Office properties have continued to struggle though, with elevated vacancies that have continued to deteriorate. Growthpoint’s office portfolio vacancies increased from 19.9% to 21.2% in this period.

Growthpoint’s portfolio mix means that revenue fell by 4.8% in this interim period and headline earnings per share (HEPS) fell by 23.4%. The movement in HEPS deserved a deeper look – I discovered that this was driven by huge swings in the investment property valuations.

The better measure is probably funds from operations per share, which increased by 17.4% to 77.40 cents. This is significantly higher than HEPS of 56.55 cents. The dividend per share increased by 5.1% to 61.5 cents.

The loan to value ratio improved from 40% to 39.2% and the interest cover ratio increased from 2.9x to 3.0x.

The net asset value (NAV) per share increased by 6.2% to R21.48 per share. Yesterday’s closing price of R13.23 means that Growthpoint is trading at a discount to NAV of around 38.5%.

Growthpoint needs tourists to return to the V&A and the workforce to return to offices. I think one of those is a certainty and the other is never going to be the same again.