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Hyprop Investments Limited
Integrated annual report and consolidated financial statements
2017
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Changes in cost-to-income ratios from year to year are frequently impacted by adjustments initiated by the city councils, which adjustments may well lead
to a movement in the ratio, but do not necessarily result from a change or increase in the cost structure of the company.
Tenant arrears
Total arrears as a percentage of rental income were still at a reasonable level, at 0,4% (2016: 0,5%). Bad debts written off during the year were R8,9 million
(2016: R13,3 million). Bad debts written off in 2016 were higher due to significant write-offs relating to Platinum Group arrears.
A challenging economic environment inevitably puts pressure on rental collection. Rental collection is one of the key performance deliverables (KPDs) for
Hyprop employees and accordingly is a focus area, especially in a tough trading environment.
Valuations
Hyprop’s South African property portfolio is valued by independent valuers at each reporting date (31 December and 30 June).
Value attributable to Hyprop
Value per
rentable area
Business segment
Rentable
area
m
2
30 June
2017
R000
30 June
2016
R000
30 June
2017
R/m
2
Shopping centres
644 196
26 490 589
25 282 472
45 181
Value centres
(1)
66 394
1 473 000
1 321 000
22 186
Retail
710 590
27 963 589
26 603 472
43 033
Standalone offices
(2)
20 328
310 798
289 075
15 289
Total (excluding properties sold)
730 918
28 274 387
26 892 547
Properties sold
(3)
838 000
Investment property
730 918
28 274 387
27 730 547
42 261
(1)
Includes Willowbridge North (held-for-sale)
(2)
Includes Lakefield office park (held-for-sale)
(3)
Properties sold during 2017 include Somerset Value Mart, Willowbridge South, Glenfield and Glenwood office parks
Excluding properties sold, investment property was valued at R28,3 billion at 30 June 2017 (2016: R26,9 billion), an increase of 5,1%. The weighted average
capitalisation rate of the portfolio is 6,6%. All discount and capitalisation rates were largely in line with the previous year.
The relatively high value per square metre of Hyprop shopping centres is indicative of the premium, high quality properties that dominate the portfolio.
Investments outside South Africa
Functional and reporting currencies for investments in sub-Saharan Africa (excluding SA) and South-Eastern Europe are the US Dollar and Euro, respectively.
The relevant exchange rates used to convert to Rand at the respective dates were:
30 June 2017
30 June 2016
Average
rate
R
Year-end
spot rate
R
Average
rate
R
Year-end
spot rate
R
US Dollar
13,63
13,04
14,87
14,77
Euro
14,53
14,90
16,40
16,40
The average rates are a weighted average of actual exchange rates on the dates that foreign currency dividends were received in South Africa. The year-end
spot rate is the rate used to translate balance sheet items at year-end.
Hyprop fixes the exchange rates on US Dollar and Euro income for six months in advance of receiving dividends.
Currently, the exchange rates on receipt of US Dollar and Euro dividends are not fixed longer than six months in advance due to some level of uncertainty
with respect to the timing and quantum of the dividends.
Investments in sub-Saharan Africa (excluding SA)
The macro-economic environment in the countries in which Hyprop and AttAfrica are invested has improved in the last six months. Local currencies are
more stable in Ghana and Zambia while US Dollar liquidity in Nigeria has improved, although at a weaker Naira exchange rate.
The weaker Naira exchange rate will put pressure on rental growth and rental collections in Nigeria, and will negatively impact the overall cost of occupancy
for tenants.
Hyprop share of
distributable earnings
30 June
2017
R000
30 June
2016
R000
Distribution received
(1)
168 241
213 388
Interest and expenses
(111 269)
(129 734)
Net
56 972
83 654
(1)
Excludes Ikeja City Mall distribution of R26,0 million