HYPROP CAPITALISES ON THRIVING RETAIL MARKET TO DECLARE ANOTHER STRONG DISTRIBUTION
An 11,7% increase in net income from its shopping centres helped Hyprop Investments deliver another set of strong interim results for the six months to June 2007. Hyprop has declared an interim distribution to unitholders of 130 cents per combined unit, up 18,2%. The fund’s portfolio boasts Canal Walk in the Western Cape, Gauteng-based Hyde Park, The Glen and The Rosebank Mall and Southcoast Mall in Kwazulu-Natal. Stoneridge Centre in Modderfontein is currently under construction and due for completion in October 2008.
A 13%, or R800 million, increase saw the total value of investment property rise to R7,4 billion, primarily due to Canal Walk’s value increasing by R550 million. This translated into net asset value per combined unit of R34,84, 11% higher than at December 2006.
Interest earned on the proceeds from Hyprop’s sale of its stake in SA Retail not only contributed significantly to distribution growth, but also reduced Hyprop’s debt substantially from R1,1 billion in December 2006 to R126 million to June 2007.
CEO Pieter Prinsloo says a buoyant economy led to healthy consumer spend and strong demand for retail space. Over 3% more shoppers visited Hyprop’s centres with spend 10% higher than in the previous year. “This helped Hyprop reduce vacancies from 8 000m² at 30 June 2006 to only 1 700 m² at 30 June 2007, representing only 0,5% of rentable space.” Hyde Park, The Glen and The Mall are all fully let.
He adds: “This demand for space at our shopping centres contributed to consistent growth in rental rates with renewed leases escalating by 15% on average. Prinsloo points out that due to strict cost controls the expense-to-income ratio is at a low 21%. “The combination of these factors meant that our shopping centres performed exceptionally well and contributed 11,7% of the growth in distributions.”
In response to this strong demand, a number of expansion projects are currently underway at Hyprop’s shopping centres. At The Glen the R8,7 million extension of the banking arena began earlier this month at an estimated initial yield of 17%. Canal Walk’s new Mr Price Home store should be complete by November 2007, adding 3 500m² to the centre at a cost of R32,4 million and a yield of 13%. The R5,7 million conversion of unused cinema theatres into a Sportsmans Warehouse store should be complete at the same time, at an initial yield of 18%. Hyprop’s newest centre, Southcoast Mall, is expanding with a 1 000m² Boardmans scheduled for completion in October 2007 at a cost of R6 million and an initial yield of 9,5%.
Hyprop has further identified a number of future development projects “looking to strengthen its market position and enhance tenant mix in existing centres”. These include the 19 000 m² expansion at The Glen which has just received local authority approval, 2 and the application for 16 000 m² of extra retail rights at Canal Walk which is awaiting approval.
Prinsloo says: “These current and future developments are expected to help drive growth in assets and income.” Hyprop has on hand R3,4 billion of available borrowings to help fund future investments.
Prinsloo remains optimistic about economic growth. “While rising interest rates, inflation and fuel costs may negatively impact on consumer spending, good increases in salaries, higher employment and the emerging middle class should generate sustainable growth.”
Looking to year-end he anticipates continued growth in distributions of between 14% and 17% compared to the distribution for 2006. This increase is marginally higher than the 12% to 15% previously forecast in March 2007.
Hyprop’s combined units closed yesterday at R41,80 a unit.