Growthpoint Properties continues to proceed with caution, despite improved distribution figures, in the midst of a continuingly uncertain economic environment, according to Norbert Sasse, CEO of Growthpoint Properties.

The company, on Wednesday, reported an 8.1% rise in distributions to 131.0 cents per linked unit for the year ended June, compared with the previous corresponding period.

SA's largest listed property fund said distributions were in line with expectations. Net property income rose to 3.6 billion rand from 3.2 billion rand, while operating profit rose to 3.4 billion rand from 3.1 billion rand previously.

Sasse attributed the positive performance to aggressive property cost management, vigilant control of arrears, fortified portfolio occupancy levels and the distribution enhancing performance of Growthpoint Properties Australia (GOZ) in which Growthpoint has a 61% holding.

He said the defensive nature of the listed property sector was evident from this good performance, especially when the volatile times that were currently present were considered.

"Whilst Growthpoint's vacancies and arrears improved during the financial year to June, this does not appear to be a common trend across the industry or the listed property sector as a whole," Sasse said. The retail and industrial property sectors were holding steady and showed some resilience.

"Despite relatively high office vacancies nationally, Growthpoint will be aggressively marketing its available space and expects vacancies to decline in the year ahead," the fund said.

Sasse said: "Despite relatively weak overall market conditions we have been successful in renewing 65.8% of all leases that expired during the financial year. These have reflected weighted average increases in rentals on renewal of 3.1%.

"We have noted that clients are generally seeking shorter leases, reflecting uncertainty on the outlook of the SA and global economies," he added.

In the country's largest single property transaction to date, Growthpoint acquired 50% of the iconic V&A Waterfront property in Cape Town for 4.9 billion rand. Growthpoint and the Government Employees Pension Fund (GEPF), represented by the Public Investment Corporation Limited (PIC), purchased this landmark property in equal proportions and took transfer in June, the company said in a statement.

Sasse noted that Growthpoint's long-term expectations of the V&A Waterfront were for superior returns generated by completing all development opportunities.

"The V&A Waterfront transaction has given Growthpoint development exposure to what is arguably the most valuable development bulk and rights in SA," he said.

Sasse confirmed that Growthpoint's immediate objective was to formulate an overall precinct master plan with the GEPF to ensure the ability to take best advantage of opportunities and demand in changing markets, as well as maximising management structures.

With the backdrop of the waterfront being widely recognised as a significant tourist destination, Sasse addressed the concerns about reliance on the tourism sector by placing these worries in perspective. He said that their actual exposure to hotel operations was limited and that land rental was the main influence on return. Growthpoint would only be significantly affected in the unlikely event that the hotel businesses were unable to continue their trade.

Growthpoint said their investment in GOZ continued to perform positively with the strong Australian dollar providing an additional boost to Growthpoint's distributions. Growthpoint's nominal return - which included income return, capital return and currency devaluation of the rand to the Australian dollar - since investing in GOZ in September 2009 was in excess of 50%, whilst the total return over the past 12 months amounted to 28.6% made up of an income return of 11.4% and a capital return of 17.2%.

GOZ acquired 15 properties during the year, bringing its total number of properties to 37 across Australia and increasing the value of the GOZ portfolio to AU$1.2 billion. GOZ's investment property portfolio had nearly doubled since Growthpoint's initial investment some 18 months ago. This had diversified the fund from purely industrial properties to including a 28% spread of offices at year end according to the company.

Sasse said that investment activity going forward largely resided in the re-development space rather than development from scratch.

Sasse noted that distribution growth for Growthpoint linked unit holders for next year was expected to be between 3% and 7%. He cautioned that the sluggish recovery in the SA economy, weak demand for space and debt margins, which continue to increase on the refinancing of existing debt, were all factors expected to effect the performance of the listed property sector in the coming year.

"The size, quality and diversity of Growthpoint's portfolio, together with a strong balance sheet and relatively low gearing stand the company in good stead to continue growing distributions," said Sasse. "Ongoing investment in our portfolio through refurbishments, redevelopments and capital expenditure, as well as active asset management, also underpin long-term capital appreciation."