The market in which we operate

The listed property sector in South Africa is a sizeable market, valued at around R250 billion and spread among 28 listed companies. It ranks in the top-10 REIT markets globally. By comparison, this market was worth only R5 billion 12 years ago.

By market capitalisation, Hyprop ranks third in its sector and manages almost one-third (over 750 000m² excluding Rosebank Mall) of the gross lettable area in shopping centres nationally.

Hyprop specialises in high-quality shopping centres, making the state of the retail market an important indicator in our performance. In 2013, consumers spent R407 billion in South African shopping centres, accounting for 70% of annual retail spend. Each month, audited figures show that super-regional and regional malls alone attracted some 800 000 consumers.

Since 1996, seven million square metres (equivalent to 47 super-regional malls) have been added to the South African market. As shown in the graph opposite and based on a European study, South Africa has more mall space per head (measured as m²/1 000 people) than its comparable retail sales appear to justify.

Yet vacancies, a key indicator of a property sector’s health, are lower in South Africa than the average for other countries through the cycle.

In particular, retail property in South Africa has had lower vacancies and been more defensive (lower rise in vacancies during the recession and global financial crisis). Within retail property, regional malls (over 60% of our portfolio) have shown the lowest vacancies and least cyclicality through the cycle.

Investing in sub-Saharan Africa Economic growth in Africa is robust, with Nigeria now officially overtaking South Africa as the largest economy by GDP at USD510 billion. In tandem, levels of governance, economic management and transparency have generally improved, although poor infrastructure development remains a challenge. For Real Estate Investment Trusts like Hyprop, an economic growth rate above 5% for the continent for almost a decade means an expanding urban class, with the propensity to spend. Sub-Saharan Africa (SSA) GDP growth %   Ghana and Zambia GDP growth %   Sub-Saharan Africa (outside South Africa) has a significant shortage of high-quality retail property — less than two million square metres catering for over one billion people, compared to South Africa with 21 million square metres for 52 million people. In addition, Africa is urbanising rapidly, with metropolitan populations expanding at over 3% per annum. Some cities are growing faster, such as Abuja at 9% and Luanda at 6%. Equally, many African cities have recorded remarkable economic growth. Accra is among the world’s fastest-growing cities. Maputo, Lusaka and Lagos are also expanding rapidly. Hyprop has investments in Accra and Lusaka. Sustained economic growth is fuelling the urban middle-class expansion — a key source of private-sector growth underpinning modern retailing. The most rapid growth in the middle-class population in sub-Saharan Africa is in cities such as Lagos, Abuja, Luanda, Accra and Nairobi. This helps drive pent-up demand from brand-conscious urban consumers looking for quality products and a modern shopping experience. In line with our strategy of investing in quality shopping centres in sub-Saharan Africa, we have allocated up to R3 billion in the region over the next three years. The allocation includes the amount of R812 million spent to date. Atterbury Africa will focus on acquiring existing high-quality shopping centres in large metropolitan cities in Africa and developing new ones: Development of the 27 500m2 West Hills Mall in Accra, Ghana is under way, with completion on track for October 2014. Phase II, a further 12 000m2, will begin in the next year. Other recent developments include the 27 000m2 Kumasi City Mall in Kumasi, Ghana, scheduled for completion end 2016. This mall will feature 60 line shops and restaurants, and further developments may include a hotel To diversify geographically and drive medium-term growth, we acquired 87% of African Land Investments for R768 million in December 2013, while Attacq acquired the balance for R110 million. Post-year-end this investment was restructured, with Hyprop and Atterbury Africa, a joint venture with Attacq Limited and the Atterbury Group, each holding 50% of African Land African Land’s only asset, Manda Hill in Lusaka, Zambia, is the first regional shopping centre in that country and one of the largest outside South Africa with GLA of 43 400m2 valued at USD153 million. The centre is currently fully let, with strong demand from retailers. An extension of 10 000m2 has been approved to address this demand and improve the tenant mix. Construction will take place over the next two years. Property   GLA m2 Atterbury Africa ownership % Attributable value USD000 Hyprop’s effective shareholding %     Comments Existing centre   Accra Mall (Accra, Ghana)   19 000 47 38 780 17,6     Existing centre, future expansion planned Developments   West Hills Mall (Accra, Ghana)   27 500 45 29 850 16,8     Opening October 2014 Achimota Mall (Accra, Ghana)   13 000 75 5 567 28,1     Construction commenced, opening October 2015 Kumasi City Mall (Kumasi, Ghana)   27 000 75 7 380 28,1     Concluded acquisition of land rights, design finalised and pre-letting commenced Waterfalls Project (Lusaka, Zambia)   27 500 25 1 215 9,4     Land holding with development rights for retail and hotel