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Growthpoint says the odds will hold against V&A Waterfront if SA does not appear to have Covid-19 under control, as its variant is perceived to be more infectious and deadly.
- The V&A Waterfront owner says the rapid launch of the Covid-19 vaccine is crucial to the recovery of the flagship tourist attraction.
- Growthpoint Properties also says the attraction was devastated by tougher lockdown regulations introduced in December 2020.
- Delinquent tenants are on the rise, despite the millions of rental subsidies that the V&A Waterfront has provided since the start of the closure.
Growthpoint Properties says it expects this year to continue to weigh on its flagship V&A Waterfront given the slow rollout of Covid-19 vaccines in the country and the perception that the South African variant of the virus is “more deadly.”
During the presentation of its financial results for the six months to December 31, Growthpoint, which is the largest listed owner of SA, said that the number of delinquent tenants at the V&A Waterfront continues to rise and bad debts nearly doubled between June and December 2020 from R6. .8 million to R13.3 million.
Growthpoint owns a 50% stake in this iconic Cape Town tourist attraction.
The V&A Waterfront provided R91 million in rental assistance to its tenants, many of whom saw their businesses devastated due to their dependence on tourists. That exceeded the R161 million in rental discounts that Growthpoint provided on its other properties in the six months through December.
Historically, V&A Waterfront has always been an outstanding performer for Growthpoint. However, given its heavy reliance on international and local tourism, it has suffered disproportionately to the rest of Growthpoint’s portfolio since the virus was first reported in South Africa.
Apart from the shortage of international tourists, its situation was exacerbated by its high exposure to restaurants, jewelers and hotels.
Prompt vaccination is crucial to the Waterfront’s recovery
Since its recovery is highly dependent on the resumption of international tourism, Estienne de Klerk, SA CEO of Growthpoint Properties, said that the faster the countries where the majority of tourists visiting SA come from vaccinate their populations, the faster trust between travelers will return. However, SA also needs to move at a pace that shows it has the situation at home under control.
“I think given the rate at which we are vaccinating, that confidence will take some time to come,” De Klerk said.
Growthpoint Group CEO Norbert Sasse said the odds will remain against the V&A if the country does not appear to have Covid-19 under control as the SA variant is perceived to be more infectious and deadly.
“Not that this is necessarily the case, but there are perceptions and international travelers are going to be more concerned about that. Unfortunately for us, there is also talk of the third wave that could arrive as soon as April, and we will not do it some time. real progress on vaccines in South Africa before then, “he said.
Sasse said that this “fuzzy” outlook made it difficult for Growthpoint to even provide any guidance on its 2021 earnings at this stage.
De Klerk said that if SA can get some confidence to return to the domestic tourism market, that will help. At some point in late 2020, it looked like local tourism was on a rebound. The Waterfront began receiving more bookings for its hotels, but then tighter level 3 lockdown restrictions severely held back that trust.
“I think December would have been a much better season if it weren’t for the lockout. That certainly hurt the V&A because they had reasonable reserves and some major cancellations as a result of the lockout,” De Klerk said.
In the six months to December, V&A Waterfront recorded a 48% reduction in its net income per property to R179 million. Its contribution to the distributable earnings of Growthpoint fell by R176 million.
“The Waterfront Numbers [are] essentially about half of what they were in the comparable period, “Sasse said.
While Growthpoint expects Waterfront tenants who depend on tourists to continue to be hit by the virus in the near term, the owner said some are doing well.
“The clothing retailer is doing well. It’s quite funny, the high-end fashion, the Guccis and the Louis Vuittons, are doing well. The food retailers are doing well,” Sasse said.
The Waterfront clings to its tenants
Still, vacancies at Waterfront are considerably lower than the rest of Growthpoint SA’s retail portfolio, which stood at 5.4% at the end of December 2020. At V&A Waterfront, vacancies increased from 1.5% in June 2020 to 2.3%.
Where Growthpoint is struggling the most with the increase in vacancies is in office space, where they rose to 18%. It is also the portfolio that suffered the most problems in terms of the fall in property values with another amortization of R1.3 billion in the six months to December.
“I think 18% is without a doubt the highest we’ve seen in our careers in terms of vacancies when it comes to positions,” De Klerk said.
Growthpoint expects more problems this year in office space, both in terms of falling valuations and rising vacancies. But de Klerk said his office teams were confident they could stabilize this soon.
