HYPROP POSTS RECORD DISTRIBUTION GROWTH
JSE property fund Hyprop Investments today announced its fourteenth consecutive year of growth with a record increase in distributions of 20% for the twelve months to December 2007. The full annual distribution is 270 cents a unit. The final distribution of 140 cents for the six months June to December 2007 reflects an increase of 21,7%.
CEO Pieter Prinsloo says Hyprop’s shopping centres recorded excellent net income growth of 14% growth year-on-year, despite the slow-down in consumer spend in the second half of 2007. “Hyprop’s quality regional and super regional shopping centres, which contribute 84% of total income, have demonstrated their resilience to economic slow-down.” With the inclusion of the office portfolio, like-for-like net income growth was 12,5%.
He says: “Rentals continued to escalate in light of demand for retail space, which also resulted in continued low vacancy levels at all of the centres.” Vacancies reduced to 0,75% from 1,1% in the previous year.
Distribution growth was further boosted when the fund sold its stake in SA Retail during the year for R1,135 billion, which generated significant interest savings on application of the proceeds, and acquired 31,7% of listed PUT Sycom in October 2007 on a yield-enhancing basis. Subsequent to year-end Hyprop has increased its holding in Sycom to 34,7% .
Hyprop continued to achieve further gains on revaluation of its investment property portfolio with an increase of R1,36 billion. Prinsloo says the board is satisfied that the value is fair and reasonable and reflects Hyprop’s high quality portfolio.
A 24% increase in the value of the investment property portfolio to R6,9 billion translated into higher net asset value per combined unit of R49,93 (excluding deferred taxation). The gearing ratio reduced to 3,6% with borrowings totalling R312 million at year-end.
In line with strategy to retain focus on shopping centres, Hyprop disposed of two office blocks for R191 million in aggregate.
Prinsloo says that following the completion of smaller expansion projects at the shopping centres during the year, focus will shift in 2008 to major expansion projects to ensure long-term growth in the portfolio.
In October 2008 Hyprop expects to open Stoneridge Centre, a 50 000m² lifestyle development in Greenstone Park. The development will cost Hyprop R508 million with an initial yield of 8,3%.
“New expansion projects totalling more than R650 million are set to kick-off in 2008 and are anticipated to yield favourable returns in the future,” he says.
Plans for 16 000m² of new retail space at Canal Walk are progressing well. The estimated development cost for Hyprop is R200 million. “We have received positive letting enquiries and construction is scheduled for completion in May 2009.” The design of the 19 000m² retail extension at The Glen is complete and construction is set to begin in May 2008 with an estimated development cost for Hyprop of R277 million and an anticipated yield of 10,9%.
At Hyde Park Hyprop is planning a R176 million hotel development with an anticipated yield of 11,4%. “The upmarket four-star hotel is expected to be completed in June 2009 and will reflect and enhance the exclusivity of the Hyde Park Shopping Centre.”
Prinsloo says he is positive about growth prospects despite uncertain economic conditions in the country and volatile markets globally. “We have quality assets of a strong defensive nature. This, together with low gearing, has put Hyprop in a sound financial position.” He adds that there has been no drop-off in demand for retail space. “While depressed consumer spending may be a challenge we will face in 2008, the quality of our assets should ensure that we continue to see strong demand for retail space. In this light we intend to continue investing in our centres.”
For the year ending December 2008 Hyprop anticipates growth in distributions of 12% to 14%.
Hyprop’s combined units closed Friday at R42,60 a unit.