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Hyprop Investments Limited
Integrated annual report and consolidated financial statements
2017
Property
portfolio
Although property is a long-term asset class, the short-term focus
of the investor community puts pressure on REITs to produce
near-term dividend growth. To meet investors’ demands, many SA
REITs have increased their exposure to overseas assets, with some
46% of total assets now based offshore due to limited domestic
opportunities and relatively low European funding rates.
Although the South African property market is mature in terms
of available and attractive investments, rapid population growth,
increasing urbanisation and a growing middle class continue to
stimulate demand for retail space. The country retains its
prominent mall culture, where quality shopping centres in a good
location, with an attractive tenant mix and well-kept facilities
perform well. Retailers are currently choosing to invest more in
their flagship stores in existing high quality malls, as opposed to
aggressively rolling out new stores in other malls.
Investing outside South Africa
South-Eastern Europe
There has been a marked increase in investment activity by South
African property funds in central and eastern European markets,
particularly in the retail sector. Hyprop has a 60% interest in three
South-Eastern European malls in Macedonia, Serbia and
Montenegro and has reached agreement to acquire a 60% interest
in The Mall, Sofia, Bulgaria, post year-end. These countries are
recording strong economic growth that, together with lower taxes,
translates into a better return on investment.
We will grow this portfolio to the extent that further opportunities
become available at prices that meet our investment criteria.
Sub-Saharan Africa (excluding SA)
Hyprop believes that this region offers long-term opportunities. In
line with our strategy, we are focused on owning shopping centres
in large African cities, with high population densities and disposable
income. We are currently invested in six shopping centres in
sub-Saharan Africa: Ghana (4), Zambia (1) and Nigeria (1).
Recent years have been more difficult for the region, especially for
countries that depend on oil as a revenue stream. Lower oil prices
and slowing Chinese growth have culminated in the region
recording its lowest growth in 20 years.
Although the key cities where Hyprop is invested continue to
record economic growth – supported by rising urbanisation,
population growth and industrialisation – we do not currently
plan to expand our African exposure.
Geographical spread
Hyprop’s portfolio is dominated by retail property in middle to high-income metropolitan areas, reinforcing its pro le as a specialist shopping centre REIT.
●
Core South African portfolio
R27,9bn
●
sub-Saharan Africa (excluding SA) R4,5bn
●
South-Eastern Europe
R2,7bn
●
Held-for-sale (South Africa)
R419m
INVESTMENT PROFILE
1%
79%
13%
7%
Sources:
Supporting data for this market overview has been drawn from analysts’ reports, StatsSA, the South African Reserve Bank and others.
The markets
in which
we operate
continued