Business model

Creating value for stakeholders: inputs, outputs and outcomes defined

As an income-focused REIT, Hyprop creates value for investors and other stakeholders by owning and investing in quality shopping centres, benefiting from active asset management based on ethical leadership and sound corporate governance principles. This results in sustainable real estate investments, which generate long-term capital and income growth.

Material issues that could impact our ability to create value are detailed in our risk and opportunity management section can be found here.

Inputs   Outputs Outcomes

Business activities

  

Product and services delivered

Sustainable value creation from business activities

Financial capital
Responsibility: Income growth and capital appreciation

Financing activities

Invest capital received from equity investors
Obtain capital from debt funders
Reinvest capital received from disposals

Total investment returns to investors
Sustainable dividend growth over the long term

Distribution growth up 12,1%
Increase in NAV of 5,6%
Loan to value of 28,9%
R696 million equity raised
Disposal of non-core properties for R867 million

Manufactured capital
Responsibility: To ensure manufactured capital generates capital appreciation and income growth

Own and invest

Own high-quality, dominant shopping centres in large metropolitan areas

Seek expansion and redevelopment opportunities

Pursue appropriate yield-enhancing acquisitions

Effective capital and debt management

Ownership of quality shopping centres providing sustainable income Reinvest through developments and refurbishments

Geographic diversification in other markets

Leverage our industry relationships to secure off-market transactions

Utilise strong balance sheet to negotiate favourable financing terms

Acquired a 60% interest in Skopje City Mall, Macedonia
Agreement to acquire a 60% interest in The Mall in Sofia, Bulgaria

Developments under construction – R178 million spent on extensions and refurbishments

Average interest of 6,7% excluding Euro debt
Financial covenants well within required ratios

Intellectual capital
Responsibility: Intellectual property and corporate culture are critical to preserve, grow and retain skills

Leasing

Lease administration and management of tenants

Manage occupancy levels


Manage tenant arrears

Manage bad debts

Above-inflation contractual rental escalations

Optimal tenant mix to meet customer demands

Growth in turnover densities

Strong internal team with established relationships with tenants

Contractual rental escalations of 7,9%


Occupancy rate of 97,6%


Arrears at 0,4% of rent roll Reduction in bad debts written off compared to previous year

1,4% increase in trading densities

Asset management

Internal asset and property management focusing on value-adding opportunities and achieving key performance deliverables

 

Hands-on decentralised teams at each shopping centre supported by specialised and experienced executive management

Increasing property values

Cost efficiencies through:
Standardised internal processes
National service level agreements with suppliers
Using specialists and technology for effective utilities management
Proactive maintenance planning

Property value increased by 5,1% Investment property (SA) cost-to-income ratio of 33,3% (2016: 33,2%)

Exceeded budget on operating income by 1,1%

Achieved maintenance targets

89% of procurement from companies with a BBBEE level between 1 and 4

Investment of R44,9 million in replacement of equipment and technology

Information management

Secure operating systems

 

Integrated electronic property management system

Integrated electronic human resource system

Electronic email contingency system

Back-up cloud storage facilities

Continuity in operations


Improved synergy between teams located in multiple locations


Increased productivity

Stakeholder communication

Dedicated investor relations manager and marketing executives

 

Effective controls and processes supporting transparent disclosure

 

Transparent and reliable communication through multiple communications channels

 

Natural capital
Responsibility: To ensure that operations (occupation and redevelopment of properties, day-to-day activities) limit their impact on the environment

Improve environmental efficiency of properties

 

Energy, carbon emission, water and waste-reduction targets

Resource management

Execute environmental strategy

Reduced environmental footprint


Voluntary participation in global environmental benchmarks

Improvements made to an already small environmental footprint

Third phase of solar photovoltaic plant at Clearwater Mall
R9,5 million cost savings to the SA portfolio from energy efficiency initiatives
79% of waste recycled (2016: 78%)

Human capital
Responsibility: To grow and nurture the talent, knowledge and skills of our people

Ethical leadership

Regulatory compliance and corporate governance

Experienced board of directors


Competent executive management

Compliance with JSE regulations and Companies Act

Strategic risk and opportunity identification and management

Investment strategy to protect and grow the business

114% achieved on key performance targets

Additional board member appointed

 

Employee management

Fair remuneration





Employee relations





Education and training



Skills retention



Equality

Remuneration policy – includes a clear remuneration structure
Salary benchmarks and surveys
Employee benefits applied to all levels of employment

Employee engagement and communication
Inhouse human resource department
Safe and healthy work environment
Company code and policy – defines the
HR processes and is reviewed annually

Develop employee knowledge base and productivity
Improved employee productivity
Address skills shortage

Low staff turnover
Share incentive scheme to retain executive management and align with company strategy

Employment equity targets
Recruitment
Equal opportunity
Non-discrimination

Performance-based remuneration
Increased lowest base salary by 29%
Reviewed salaries to align equal pay for equal work

No serious injuries on duty reported
Low ratio of unproductive leave days
Employee survey – 97% satisfied




Training targets exceeded
Net distributable earnings per employee increased by 20%


Employee tenure of 92%




Improved employment equity status 83% of new employment and 86% of job promotions from designated groups
No grievances reported

Social and relationship capital
Responsibility: To ensure interactions with local stakeholders are meaningful and constructive

Corporate social investment (CSI)

 

 Hyprop Foundation



Culture of involvement

Sustainable social responsibility through education, community upliftment and enterprise development

Employee, tenant and customer participation in CSI initiatives

Contribute towards BBBEE scorecard

R1,6 million invested in CSI projects



Time, funds and goods donated to various beneficiaries

Contributed R2,6 million towards social investments element on BBBEE scorecard