HYPROPíS DISTRIBUTION GROWTH CONTINUES
Leading JSE shopping centre fund, Hyprop, reported distributions up 6,8% to 409 cents a unit for the year to December 2012, buoyed by positive rental growth and increased trading density particularly at its large shopping centres. Total return to unitholders was 44,8% supported by a 37% growth in market capitalisation to R17,7 billion. During the year Hyprop successfully launched its investment into Africa and kicked-off the R920 million redevelopment of Rosebank Mall.
CEO Pieter Prinsloo says: “Over the past 25 years Hyprop has consistently delivered sustainable income and capital growth, and in our quarter century anniversary year has again demonstrated solid growth.”
Driven by strong demand for retail, particularly in the larger shopping centres, vacancy levels reduced to 1,7% (December 2011: 3,0%). “Some progress was also made in reducing vacancies in the office portfolio, despite a far tougher commercial market. Total vacancies overall decreased to 2,5% from 3,9%,” says Prinsloo. Effective cost control improved the overall cost to income ratio to 35,4% (December 2011: 37,5%), while total arrears reduced from R41,3 million in the previous year to R19,8 million.
Hyprop exited further from non-core assets when it sold assets to the value of R524 million. These included the Southern Sun Hyde Park hotel and its 50% undivided share in Southcoast Mall.
Net borrowings at year-end amounted to R4,9 billion, equating to 23,1% gearing, which was down from 26,2% at December 2011. In September 2012 Hyprop increased its debt capital market funding to R1 billion, with the issue of a R300 million five-year bond at a fixed rate of 7,3%. “Our total DCM issue equates to 20% of our total net borrowings.”
The year marked Hyprop’s entry onto the African continent with the acquisition of a 37,5% stake in Atterbury Africa. “The emerging economies in Africa offer us promising opportunity to expand on quality existing centres and to develop our own in these fast-growing regions,” says Prinsloo. Atterbury Africa has already increased its stake in Accra Mall in Ghana to 47%, and begun construction on the West Hills shopping centre in western Accra. “At year-end Hyprop had invested R111 million of our R750 million total commitment.”
The redevelopment programme at Rosebank Mall is set for completion by the second half of 2014. “Construction is being carried out in a phased process and is progressing well. 90% of the lettable area has already been taken up in committed leases,” Prinsloo highlights. The shopping centre will increase its size to 62 000m².
Looking ahead he sees the conversion to a Real Estate Investment Trust (REIT) as a positive development. “The conversion will not only make us more attractive to international investors but also bring uniformity to capital structures in the property market and tax certainty.”
Prinsloo concludes that Hyprop will continue enhancing its portfolio through appropriate acquisitions and expanding and enhancing existing shopping centres in line with tenant demand. “Our focus remains on investment in dominant shopping centres both locally and across Africa, while continuing to dispose of any remaining non-core assets if the opportunity arises.”
Taking into account the short-term dilution effect of the Rosebank Mall development, Hyprop expects distribution growth of 5% to 7% for the year ahead to December 2013.