HYPROP CONTINUES TO DELIVER STEADY DISTRIBUTIONS GROWTH
Major JSE retail property fund Hyprop Investments again demonstrated the resilience of its shopping centre portfolio with 6.5% growth in distributions to unitholders, totalling 328 cents a unit, for the year to December 2009. Countering tough economic conditions Hyprop successfully completed its R633 million expansion plan that saw all new stores in Canal Walk and The Glen Shopping Centre opened for trade, and the opening of the Southern Sun Hyde Park Hotel atop the centre’s parkade. The group also began preparing for its 2010 revitalisation of the Mall of Rosebank through strategic land acquisitions in close proximity to the centre.
CEO Mike Rodel points out that Hyprop’s average distribution growth over the last decade equates to 12% a year, which he attributes to the sustainability of its assets. He contextualises this year’s single-digit increase within the broader recessionary environment. “Clearly falling consumer spend in light of the weak economy impacted on our shopping centres. However our proactive asset management continues to unlock value in our existing real estate to ensure we deliver growth, albeit at a lower rate.”
On a like-for-like basis compared to 2008 (excluding Stoneridge and the new retail space at Canal Walk and The Glen) revenue and earnings at the shopping centres were up 11% and 12%, respectively. Total revenue increased 20% year-on-year.
Focus on lease renewals and extensions ensured that high occupancy levels were maintained with the portfolio 96% let. Excluding Stoneridge, vacancies at year-end stood at only 1,9%. “We have put in place a plan to target vacant space at Stoneridge in 2010 through a combination of strategies: reviewing the tenant mix including termination and replacement where necessary, assisting underperforming but viable tenants and in the short-term focusing the attentions of our new in-house retail leasing specialist on the centre,” says Rodel.
He highlights Hyprop’s strong balance sheet with gearing at only 13% - “still low despite further financing for the completion of the 2009 developments and funding of the acquisitions in the Rosebank node”. During the year Boulevard Shopping opened at Canal Walk comprising six new stand-alone retail units and the food court – already a major strength – was upgraded and extended. The Glen in the south of Johannesburg added 19 000 m² of stores and parking bays. At a total cost of R479 million the extensions achieved initial yields of 8,2% and 10,2%, respectively.
Of the Southern Sun Hyde Park Hotel, Rodel says: “The first few months have been challenging from an occupancy perspective against the backdrop of a suffering hospitality industry worldwide.” He adds though that the Hotel’s amenities including its exclusive whiskey bar and Bice restaurant have met with popular success, and occupancies in February 2010 are ahead of target with a very strong corporate uptake. The Hotel is further expected to benefit from increased occupancies during the FIFA
World Cup. Hyprop will also shortly be initiating a cosmetic upgrade of the Hyde Park retail mall and parkade in line with the understated luxury of the Hotel.
At The Mall of Rosebank a Planet Fitness gym was successfully opened in October 2009, introducing a new lifestyle anchor into the centre. Planning is also in process for the refurbishment and extension of The Mall that will see new stores introduced, finishes upgraded and facilities including parking extended, all linking to the adjacent Rosebank Gardens site (bought in 2009) that will be redeveloped into a mixed use complex.
Hyprop is anticipating a boost to its bottom line going forward with cost savings flowing from the re-negotiated relationship with its former asset and property managers, Madison (now Redefine). The new consultancy agreement is on a fixed-fee basis of R1,5 million a month for 18 months from January 2010. Hyprop has accordingly bolstered its executive team for in-house asset management. Steven Riley will be responsible for all new developments and refurbishments while Mark Ruffley will focus on driving the leasing of vacant space and co-ordinating the portfolio’s renewal programme.
Rodel says Hyprop will continue concentrating on the fundamentals of retail property management to sustain future growth, and concludes that growth in distributions should continue for the 2010 financial year at around 9%.
Combined units in Hyprop closed yesterday at R49,20.