Growthpoint Properties Limited

Analyst thesis

Our recommendation is based on:

• Improving SA property fundamentals: Leasing conditions are strengthening, vacancies are trending lower, and tenant retention is improving. The directly held SA portfolio comprises the Retail (40%), Office (39%), L&I (20%) and T&D (1%) segments. Retail and L&I remain the healthiest, while Office vacancies remain elevated.

• Growthpoint (GRT) has used asset recycling to reduce leverage and create capacity to reinvest. Management is directing capital away from lower-growth assets towards higher-quality developments and faster-growing sectors.

• Continued disposals may dilute near-term earnings, but the strategy simplifies the portfolio, strengthens the balance sheet and reallocates capital to assets with stronger growth prospects and better return profiles.

• L&I assets offer the strongest structural growth opportunity, supported by demand for modern logistics and warehousing space, low vacancies and GRT’s ongoing rotation from older industrial assets into modern, secure logistics parks.

• The 50%-owned V&A Waterfront is a differentiated earnings platform spanning retail, tourism, hospitality, residential and marine activities. It contributed 18.6% to FY26 group DIPS and offers substantial development opportunities, including the planned Granger Bay development. Regulatory approval process remains under way, with final approvals expected towards the end of 2027.

• Offshore exposure remains a source of diversification, but it also introduces uncertainty. GOZ's like-for-like property FFO increased by 2.6%, while its weighted average cost of debt edged up to 5.1% from 5.0%.

• The Cape Winelands Airport investment provides longer-term development options for GRT’s Western Cape logistics and precinct strategy, with scope for future logistics, commercial and related developments. Given the early stage of the project, we do not currently assume a material near-term earnings contribution.