HYPROPĒS DISTRIBUTION JUMPS BY AN EXCEPTIONAL 16,4%
Marking its 11th consecutive year of growth, property loan stock Hyprop Investments today beat market expectations with its total distribution to unitholders up by 16,4%. The distribution of 163 cents per unit outshone the forecast of 150,5 cents by 8%. An outstanding performance from the group’s retail portfolio helped to boost the total portfolio value to almost R4 billion, a leap of R924 million over last year.
Headline earnings per unit grew by 15% to 163,8 cents. Net asset value benefited from the increase in the portfolio’s value to rise 53,2% to R17.91 per unit, narrowing the gap to around 11% on Hyprop’s trading price on the JSE of R20 a unit. The combination of income and capital growth in 2004 provided unitholders with a 55,5% total return on investment.
Hyprop significantly improved its financial position when it used much of the R376 million raised in last year’s rights offer to cut debt to R882,6 million – equating to 28% of the fund’s higher portfolio value and almost half of last year’s 51% debt-to-open market ratio.
MD Pieter Prinsloo attributes the group’s results to the retail portfolio’s performance. He says that factors such as the strong Rand and interest rate cuts played a role in spiking consumer confidence - visits to Hyprop’s centres increased by 4% to 45 million visits in total for the year. Canal Walk, included for the full year for the first time since it was bought by Hyprop in October 2003, yielded a 12,4% return on cost.
Prinsloo says that “demand for space from retailers has driven up rental levels, boding well for the retail portfolio’s sustainability”. He also points out that Hyprop worked hard to optimise the favourable market conditions - “proactive management limited tenant replacements and almost eliminated vacancies, significantly at Canal Walk”.
In line with strategy to focus on large-scale regional shopping centres Hyprop bought a bigger stake in The Glen for R112,8 million, to own 75.15% of the centre. The Glen opened its first phase of the R92 million expansion in time for the busy December period and retailers reported robust trading. Both the acquisition and expansion were financed by the balance of the funds raised from the rights offer. Hyprop further opened the extensions to Hyde Park Shopping Centre to a welcome trading response. KwaZulu- Natal’s Southcoast Mall, in which the company bought a 50% stake, is due to open in November this year anchored by major national retailers. Hyprop will contribute R96 million to the development.
Prinsloo points out that despite the challenging office market Hyprop managed to reduce office vacancies by 35% to 2,2% of the portfolio. The group also maximised its office investments by disposing of 12 buildings to a variety of buyers for an aggregate R78,6 million.
Prinsloo is upbeat about 2005. He says that economic conditions should remain positive off the back of low interest rates. “In the short-term the five-year leases at Canal Walk are up for renewal in 2005, providing an opportunity to benefit from market growth in rental levels,” he says. The group will also profit in the year ahead from The Glen’s continued expansion and the opening of the new Southcoast Mall.
He concludes that despite the exceptional growth in distributions for 2004, Hyprop is still confident of growth in distributions of around 7% for 2005.
Hyprop units yesterday reached an all-time high when they closed at R20.