Property Flash


May 23 2024 22:23

Burstone Group, the fully integrated international real estate investment trust (Reit), released its full-year to end-March 2024 results in line with guidance, reporting strong operational performances across its geographical businesses, despite earnings pressure from a high interest rate environment. 

The group delivered a solid second half performance with distributable earnings per share (DIPS) increasing by 7.4%, CEO Andrew Wooler said. Full year DIPS increased 1.0% to 105.67cents per share compared with March 2023’s 104.64 cents per share.

The results for the were underpinned by solid operational performances from the South African and European businesses, with like-for-like net operating income (NOI) up 1.5% and 6.2% (in Euros), respectively, Wooler said. The positive results were negatively affeccted with an increase in interest rates resulting in a circa R66m increase in funding costs over the period.

During the financial year the business successfully delivered on several of its strategic initiatives and is already benefiting from synergies created by the internalisation, integration of its business and its enhanced international footprint, said Wooler.

An annualised net management fee saving resulted from the internalisation to the value of R80m, which was 8% higher than the forecast at the time of the transaction.

The group rebranded from Investec Property Fund across South Africa and Europe, to Burstone Group.

About €2.1m in corporate savings were achieve in Europe, with further synergies expected in the financial year to end-March 2025.

“As we’ve transitioned into a fully integrated international real estate business, our team has delivered on what we set out to do. Despite the challenging operating environment, our regional operations have performed well, reporting pleasing operational results. We are already seeing benefits of the internalisation and we believe our new structure has set us up to deliver on our capital light strategy and to further expand our fund management strategies across all regions,” said Wooler.

De-gearing of the group balance sheet remained a focus in the near term with a planned reduction in loan-to-value (LTV) from 44% to between 37% and 40% within the next 12 months.

Between R1.2bn and R1.4bn of assets were identified for sale in South Africa, with R400m already under contract). Burstone would pursue a pipeline of European asset sales of between €150m and €250m, with circa €90m under offer and at pricing in line with book values. This was in addition to the c.R1.3bn of South African assets that were sold over the past financial year at a 1.5% premium to book.

“We believe in disciplined capital allocation and continued capital rotation to meet risk-adjusted targets. We seek to deploy capital into the best international/local opportunities that will support our longer-term strategic plan and continue to create shareholder value. We remain focused on internally generating capital through select asset disposals to support our planned reduction in LTV from 37% to 40% over the next 12 months. We are confident that we can execute on this disposal plan. We will consistently invest for the future whilst continuing to create internal capital,” said Wooler.

Burstone’s investment in Irongate, an Australian fund, performed well, and the business continued working with its core investor base, while engaging with new capital partners to explore a strong pipeline of new opportunities.

The Board has resolved to apply a payout ratio of 75% for the six months to end-March 2024, declaring a dividend of 40.95 cents per share compared with March 2023’s 48.32 cents per share.

The payout ratio was 95% for the first six months of the year, resulting in the total dividend payout ratio for the 2024 financial year of 85%, and a full-year dividend of 89.46 cents per share (March 2023: 99.41cents per share).

The group will apply a 75% payout ratio going forward and will continue to assess the appropriateness of this payout policy in light of the Group’s long-term strategy and after considering its LTV position, capital expenditure funding requirements and any potential taxation impacts.

Wooler said the strategic focus of the group over the past year had been on its repositioning from a property investment business into an integrated international real estate fund and asset management company.

Burstone’s longer-term focus will be the roll out of a capital light fund management model through continued investment in several growth opportunities, supporting our asset and geographic diversification with a material impact on earnings expected in the medium to longer-term, according to Wooler.

Wooler said Burstone would remain balance sheet led as it invested in varied markets. The group would use its spaces in different ways to attract tenants such as implementing co-working services in some of its offices.

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