March 2019 Newsletter

Growthpoint, the largest South African listed property company with a market cap of R72bn, released results during the month of March which were indicative of the difficult economic environment. Dividend per share growth was up 4.5% for the six months ended December 2018 and the net property income growth was at 1.1%. This was largely pulled down by the poor performance of the office portfolio which saw vacancies increase from 8.6% to 10.2%, which is still below the national average of the office sector at 11.2% (according to SAPOA). Management have strategically shifted their focus to offshore, particularly Poland and Eastern Europe, where growth is still occurring above 5% due to good economic fundamentals for the region.

Interestingly, the retail sector nationally, has seen an improvement in vacancies which now sit at 4.2% coming down from 5.9% in 2017. This was a response to the 4% increase in sales growth and 5.3% increase spend per head. This may be the beginnings of growth-shoots but its still too early to call a recovery, especially when national elections are around the corner. Globally, markets remained volatile as Theresa May battled to get her deal across the British parliament for Brexit and U.S markets were concerned about a possible recession on the back on an inverted yield curve, typically known for predicting a recession. South Africa’s Reserve Bank kept interest rates flat, joining global central banks as they held back on increasing rates due to slowing growth. All of these factors added to the negative performance for the month where we took some profits so as to protect the portfolio.

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