35. Capital management
 

Hyprop’s capital consists of equity and long-term debt in the form of bank debt and debt capital market funding. The company’s capital management objective is to maintain a strong capital base to provide sustainable returns to shareholders over the long term. The company’s borrowings are limited by its Memorandum of Incorporation and the JSE Listings Requirements to 60% (2017: 60%) of the directors’ bona fide valuation of the consolidated property portfolio.

Hyprop’s (theoretical) unutilised borrowing capacity can be summarised as follows(1):

  2018 
R000 		   2017 
R000 		  
Value of property portfolio(1)(2) 33 996 901    33 249 951   
60% thereof 20 398 141    19 949 971   
Total gross borrowings (long term and short term)(3) (7 884 994)   (8 900 638)  
Unutilised borrowing capacity(4) 12 513 147    11 049 332   
(1) Excludes investments in South-Eastern Europe
(2) Refer to segmental analysis
(3) Excludes Euro debt
(4) In practice the board would be unlikely to allow gearing levels to increase to 60% or even close to 60% (in the absence of a specific transaction). The current long-term preferred gearing level is 35%

At year-end, long-term borrowings may become payable in accordance with the terms of the loan arrangements. The group’s policy is to refinance the capital portion of the borrowings (in line with its capital objective above), while servicing interest.

The group is subject to various capital covenants imposed by lenders, which are managed as part of the overall funding and capital management process. The company has complied with all capital covenants specified in the debt agreements.