Growthpoint lifts Earnings but lowers Distributions

26 February 2021

Growthpoint released their results for the 6 months to December revealing a lift in earnings, minimal COVID impacts and higher valuations, yet the Group also announced a lower distributions of -15%.

Growthpoint have reduced their payout ratio from 94% to 78% reflecting the Group’s decision to maintain a more conservative payout ratio going forward.

In a further announcement, Growthpoint indicated it will use its surplus funds to re-purchase 2.5% of its stock to assist in reducing the gap between the market price and NTA which currently represents a discount of -18%.

Timothy Collyer, Managing Director of Growthpoint, said, “Growthpoint has delivered strong results this half. While the COVID-19 pandemic continues to have a profound impact on individuals and businesses around the world, the direct impact on our business to date has been relatively immaterial.

“The pandemic has highlighted the resilient nature of our property portfolio and strong tenant base. Since the Group’s inception, we have focused on constructing a portfolio of high-quality metropolitan office and industrial properties, with long leases to predominately large organisations and government tenants. There continues to be strong tenant and investor demand for these assets in the current environment.


  • Funds from operation (FFO) per security of 12.7 cents per security (cps), 0.8% up on prior corresponding period (pcp)
  • Net tangible assets (NTA) per security of $3.82, up 4.7% on 30 June 2020,
  • Gearing reduced by 230 basis points to 29.9%,
  • Statutory profit after tax of $205.8 million (1H20: $202.0 million)
  • 1H21 distribution of 10.0 cps, -15.3% lower than pcp,
  • FY21 FFO guidance of 25.2-25.5 cps provided and FY21 distribution guidance of 20.0 cps reaffirmed
  • Net property income (NPI) down 3.3% to $117.4 million and like-for-like NPI down 1.7% on pcp
  • Portfolio valued at $4.3 billion, up 2.4% on 30 June 2020 on weighted average capitalisation rate of 5.5%, down 18 basis points on 30 June 2020
  • Weighted average lease expiry (WALE) of 6.2 years (30 June 2020: 6.2 years)
  • Portfolio occupancy increased to 95% (30 June 2020: 93%)
  • Secured Bunnings as the key tenant for approximately 71% of Botanicca
  • Rent collections remaining above 99% and only $0.6 million of rent relief granted in 1H21
  • Maintained high CDP and GRESB scores

“We built upon our robust capital position during the half, extending two debt facilities and now have no debt maturing until December 2022. As the Group could deploy its more than $400 million of undrawn debt capacity and still be at the bottom of our gearing range, we are well positioned to capitalise on opportunities in the near term.

Property portfolio valuation

Growthpoint engaged external valuers to value 29 properties or approximately 49% of its property portfolio by value as at 31 December 2020. The remaining valuations were undertaken as internal or Director’s valuations. Based on this analysis, the value of the portfolio as at 31 December 2020 was $4.3 billion, 3.2% higher on a like-for-like basis than
at 30 June 2020.

The value of the Group’s office portfolio increased to $3.0 billion, from $2.9 billion as at 30 June 2020, primarily driven by strong valuation gains for assets with long leases in place. 1 Charles Street, Parramatta, New South Wales (the NSW Police Force headquarters) increased in value by $51.0 million, or 12%. The value of Botanicca 3 increased by $19.5 million, or 14%, reflecting Growthpoint’s recent success in securing Bunnings as a key tenant for approximately 71% of the asset. Excluding these two assets, the value of the Group’s office portfolio increased by 0.5%.

Excluding the divestment of 120 Northcorp Boulevard, Broadmeadows, Victoria, the value of the Growthpoint’s industrial property increased by 3.9%, driven by domestic and institutional investors’ demand for industrial properties, which continued to accelerate over the half year.

On-market securities buy-back

As part of its capital management strategy, Growthpoint will initiate an on-market securities buyback program for up to 2.5% of its issued capital when it is accretive to FFO per security and NTA per security.

Mr Collyer said, “The buy-back program has been initiated due to recent market volatility. Growthpoint is well positioned to undertake a buy-back, with low gearing and surplus capital, while continuing to pursue other initiatives to enhance securityholder returns.”

The buy-back is expected to commence no earlier than 12 March 2021 and will remain in place for 12 months.


At the beginning of the financial year, there still existed significant uncertainty around the impact of the COVID-19 pandemic on Growthpoint’s operating environment. As a result, the Group did not provide FY21 FFO guidance.

During 1H21, the impact of the COVID-19 pandemic on the Group’s financial results was immaterial. Rent collections remained high and only a small amount of additional rent relief was provided to support small to medium sized enterprise (SME) tenants. Government support measures and restrictions were reduced and several pharmaceutical companies announced their successful development of a vaccine.

As a result, the Group is now in the position to issue FFO guidance of 25.2 – 25.5 cps and is pleased to reaffirm its distribution guidance of 20.0 cps.

Mr Collyer said: “Growthpoint entered the COVID-19 pandemic on strong footing, which we have maintained throughout the crisis. While the pandemic is not over, we are confident in the resilient nature of our portfolio and are pleased to be in the position to provide earnings guidance today.

“As a business, we are now looking beyond this period and are considering opportunities, such as property acquisitions and entering into funds management, to capitalise on our strong position to ensure we can deliver longterm sustainable growth to our Securityholders.”

Our Views

Growthpoint operate a $4.3bn portfolio of Office and Industrial Assets with 97% of its tenants in the Government, listed or large corporate space. The majority of their office portfolio sits in fringe or metropolitan markets which are expected to be a little more resilient to CBD markets.

The Group have a sensible geographic weighting but could increase their industrial exposures in NSW and QLD.

The decision to reduce the distribution payout ratio will mean that the forecast distribution yield will drop to 6.3% (at todays price of $3.13), which is not out of line for the market. The Earnings per Security is forecast to be 25.5cps reflecting a 6.6% yield.

Growthpoint are on our recommend list.

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