HYPROP'S STRONG INTERIMS PROMPT HIGHER FULL-YEAR GROWTH GUIDANCE
- • Dividend up 16,6%
- • Acquired Skopje City Mall, Skopje, Macedonia
- • Sale of Willowbridge South for R460 million
- • Developments of R260 million underway (SA portfolio)
JSE specialist shopping centre REIT, Hyprop, reported strong double-digit growth in distributions for the six months to December 2016 (the period) off the back of a solid performance from the South African shopping centres, supported by the inclusion of distributable income from the newly-acquired South-Eastern European portfolio. Hyprop declared a dividend of 347,3 cents per share for the period, 16,6% up on the corresponding period in 2015.
CEO Pieter Prinsloo says that despite a slowdown locally in trading density, especially among fashion retailers, demand for retail space in Hyprop’s centres remains strong, as reflected in the low vacancies and rental arrears. Retail vacancies remain below the industry average at 0,8%.
The R15,8 million H&M installation at Somerset Mall and R31,0 million Checkers store at Atterbury Value Mart opened successfully in the period, with both retailers recording excellent trading numbers.
Further developments of R260 million are underway for extensions and refurbishments to the South African portfolio to enhance the quality retail offering. Specifically 4 300m2 of retail will be added to Rosebank Mall and an additional 1 200m2 of retail to The Glen, and Canal Walk’s La Piazza will be reconfigured to expand the retail space.
The disposal of non-core assets continued with Somerset Value Mart, Glenfield Office Park and Willowbridge South sold. In addition Willowbridge North is set to sell for R225 million in the months ahead pending regulatory and contractual approvals. Prinsloo says the group will continue looking at opportunities to dispose of their standalone office buildings. Vacancies in the office portfolio improved in the period to 3,9% from 4,5%.
Despite macro-economic challenges in the rest of Africa, the sub-Saharan portfolio showed some resilience with acceptable vacancy levels and improved December trading. Manda Hill, which has been impacted by increased competition, nonetheless remains dominant and efforts are in progress to bolster the tenant mix. Distributable earnings from Ikeja City Mall in Nigeria have been excluded from the results given the backlog in clearing forex orders and will be included once the Nigerian forex market has normalised.
Hyprop’s successful first-time expansion into South-Eastern Europe in the period added R58,4 million to income and 23,5 cents to the dividend. Hyprop acquired a 60% share in three malls in Montenegro, Serbia and Macedonia, which was funded with low interest Euro bridge funding. The bridge funding will be refinanced with term funding in tranches during 2017 at an average interest rate of 3 to 4%.
Prinsloo is positive about Hyprop’s new footprint in South-Eastern Europe. “Each of our three new centres dominates its respective area, as per our local and African portfolios, and offers quality retail to consumers.” Trading conditions in the region remain promising with foot count and turnover growth exceeding the Eurostat inflation rate. He adds that demand for space from the fashion anchor tenants is robust and mall expansions are already in planning.
Looking ahead he remains confident that the strategy of investing in high-quality, well-located, dominant shopping centres in diverse emerging markets positions Hyprop for continued growth. Notwithstanding ongoing tough conditions in South Africa, Hyprop has revised its dividend growth from 10% to approximately 12% for the full year to 30 June 2017.
Hyprop’s share closed yesterday at R125,45.