HYPROP"S 12 YEARS OF CONSECUTIVE GROWTH CULMINATE IN RECORD ANNUAL RESULTS
12 years of uninterrupted growth culminated in record annual results for Hyprop Investments Limited for the year to December 2005, reinforcing its position as SA’s leading listed retail property fund. Hyprop posted its highest distribution growth of 16,6% to give unitholders 190 cents a unit and achieved a R1,4 billion leap in the property portfolio value to R5,2 billion, an historical best for the fund.
The distribution together with capital growth in unit value delivered an excellent total return to unitholders of 61% for the year.
CEO Pieter Prinsloo attributes most of the distribution growth to “rental escalations, strict expense control and a further drop in vacancies to 2,7% of the portfolio”. He adds that “Hyprop’s distributions received from units in SA Retail, the R4,1 million profit from the sale of units in Prima and Freestone and a reduction in the interest rate margin further contributed to the growth”.
Commenting on the retail portfolio’s strong performance he says: “the R4,6 billion spent by 50 million visitors to Hyprop’s centres in 2005 helped the retail portfolio to exceed expectations”. Flagship Canal Walk grew net income by 22%, while Gauteng centre The Glen showed an increase of 30% supported by its completed expansion early in the year. Hyde Park and the Rosebank Mall showed good increases of 12% and 13% respectively, while Southcoast Mall opened well in November 2005. Prinsloo says that the requests from national retailers for additional space at the new mall bode well for the centre’s prospects.
The R1,4 billion valuation gain in Hyprop’s property portfolio is, according to Prinsloo, all the more exceptional when it takes into account that Hyprop opened only one new shopping centre toward the end of the year and therefore derived the spike in value mainly through improved performance at the existing centres. He says: “Hyprop capitalised on escalating rentals by pursuing lease renewals and proactively raising occupancy levels”.
The valuation gain, together with Hyprop’s 45% stake in SA Retail and remaining Freestone units, saw total assets under control shoot up 63% to R6,2 billion.
The fund’s sound financial position was reflected at year-end in borrowings of R1,13 billion that equate to 21% of the total portfolio value. Prinsloo is optimistic that the new funding structure with Standard Bank, announced earlier this year, should enhance this position and boost Hyprop’s future distribution growth. “The debt funding through capital markets should shave 0,5% off our interest on borrowings, translating directly into a future increase in distributions”.
Looking to the year ahead he says: “In line with strategy the R1.8 billion of borrowings available to Hyprop may be invested in prime shopping centres in good locations at appropriate investment returns”. Hyprop’s 90% stake in the new Stoneridge Centre in Modderfontein next to the Longmeadows industrial estate, was announced in late 2005. Construction of the 55 000m2 open-air, family-orientated centre is set to begin this year and should be complete in 2007. Prinsloo adds that Hyprop will also continue to grow the portfolio organically by continually optimising the retail offering and tenant mix at its centres.
Accordingly Hyprop anticipates continued growth in distributions for 2006 which Prinsloo says “will be superior in the market, albeit at a slower rate than the growth in distributions in 2005”.
With active trading of units over the past year Hyprop’s total market cap spiralled 87% to R4.3 billion, reflecting a 51% increase in unit price to R29,90 at year-end.
Trade closed Tuesday at R35,50 a unit.