Burstone, a JSE-listed property group, has announced that its earnings growth for the first half of its 2027 financial year will come in slightly below its full-year guidance. This is attributed to a strong performance in South Africa being offset by weaker European property earnings and slower investment activity offshore. Despite this, the company has maintained its full-year forecasts for distributable income per share growth of 4%-6% and dividend per share growth of 7%-9%.
The company's South African portfolio remains a key driver of performance, with like-for-like net property income expected to grow by more than 7% in the first half. This growth has been supported by stronger tenant trading, leasing activity, and the continued rollout of solar power across its retail and office portfolios. The South African market has proven resilient, allowing Burstone to offset weaker conditions in Europe.
Weaker conditions in Europe, particularly in France and Spain, have weighed on earnings from its Pan-European Logistics (PEL) platform due to higher vacancies. Additionally, higher interest and financing costs are expected to put pressure on earnings, while investment activity offshore has remained subdued. In Australia, earnings from Burstone’s existing industrial platforms are expected to improve, supported by rental increases and asset-management initiatives.
Burstone is stepping up its funds-management strategy, seeking to recycle capital from its balance sheet while building a more recurring fee-based income stream. The group has launched a South African funds-management platform with Nedbank Property Partners, seeded with a portfolio of retail and industrial properties. Burstone will retain a 50% stake and continue managing the assets.
The transaction with Nedbank Property Partners is expected to raise R677m in third-party equity and release about R4.5bn of capital for reinvestment. As a result, Burstone expects its loan-to-value ratio to fall from 39.6% to about 19%, while the value of third-party assets under management is expected to increase to R26.8bn. The group expects the transaction to be earnings accretive.
Burstone has also agreed on nonbinding framework terms with Blackstone to transition their existing European partnership and joint investment in PEL. The proposed arrangement aims to provide greater certainty about Burstone’s remaining investment in PEL, its first-loss obligations, and the future management of the platform. This move is part of Burstone’s broader strategy to recycle capital, reduce balance-sheet risk, and grow its funds-management business.
The developments form part of Burstone’s strategy to reshape its European exposure and grow its funds-management business while retaining exposure to selected property assets. Burstone has about R42bn in gross assets under management across South Africa, Europe, and Australia, with about 68% of those assets being offshore. The company is focused on recycling capital and reducing balance-sheet risk.
Key points
- Burstone's South African portfolio drives performance with like-for-like net property income growth of over 7% expected in the first half.
- The company has launched a South African funds-management platform with Nedbank Property Partners, expected to raise R677m in third-party equity.
- Burstone expects its loan-to-value ratio to fall from 39.6% to about 19% following the transaction with Nedbank Property Partners.
