HYPROP"S INTERIMS SIGNIFY 13TH CONSECUTIVE YEAR OF GROWTH
Leading listed retail property fund, Hyprop Investments, signalled its thirteenth consecutive year of growth with a record 21% growth in distributions, giving unitholders 110 cents a unit for the six months to June 2006. A R477 million increase in the value of the property portfolio to R5,7 billion contributed to total assets under management of R6,8 billion.
CEO Pieter Prinsloo attributes the fund’s strong performance to a quality retail portfolio supported by rental increases on lease renewals and the annual escalation of contractual rentals. He adds: “the buoyant retail market also fuelled a good increase in turnover rental, or additional rental calculated as a percentage of retail tenants’ turnover.” Stable operating costs further contributed to the growth.
The fund’s prime shopping centres contributed 87% of Hyprop’s total income. 45% was derived from flagship Canal Walk, which achieved a net income increase of 12%. “This was driven by revenue growth from turnover rental and improved cost control,” say Prinsloo. He highlights The Glen as the portfolio’s star performer with net income growth of 22% off the back of its successful expansion completed in 2005.
Hyprop’s other shopping centres augmented this good performance, with The Mall of Rosebank showing net income growth of 13% and Hyde Park 8%. Offices, a relatively small segment of the portfolio, grew net income by 9%. Tenant demand remained strong to maintain low vacancy levels of 2,3% across the portfolio.
Prinsloo points out that the results were aided by reduced finance costs. Hyprop’s new capital debt structure with Standard Bank, announced in January 2006, reduced interest rates by 0,5% to an average rate of 9,5% on total borrowings of R1,17 billion. The fund’s sound financial position is reflected in borrowings amounting to only 20% of the portfolio value, leaving Hyprop with a R2,1 billion borrowing capacity for future acquisitions.
During the period Hyprop bought a further 18ha of land in Greenstone Park, Modderfontein for R51 million to develop Stoneridge - a lifestyle/retail centre in the heart of affluent residential developments. The site will be developed by Abland (Pty) Limited who will own 10% after completion, with Hyprop retaining 90%.
The period further saw Hyprop conclude a strategic BEE transaction with black-owned Vunani Properties to partner in the Vunani Property Investment Fund (VPIF). Hyprop sold five non-core commercial buildings to VPIF for R174,5 million, which together with properties acquired from Vunani and others will give VPIF an aggregate asset value of R377 million to start. Hyprop currently holds 56,1% of VPIF but Prinsloo says that this will dilute to less than 50% through future acquisitions. “This will ensure that VPIF becomes truly black-owned.” Hyprop has also undertaken to transfer asset 2 management skills to VPIF and so contribute to enterprise and skills development in the property industry in line with the Charter.
Looking to year-end at 31 December 2006 Prinsloo anticipates continued growth in distributions, which “will be superior in the market, albeit at a slower rate than the growth for the interim period”.
Trade closed Friday at R32,00 a unit.