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Hyprop exceeds FY guidance with solid distribution growth

CEO Pieter Prinsloo discusses Hyprop's solid full-year showing

29th August 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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Exceeding its full-year guidance for the 12 months ended June 30, specialised shopping centre real estate investment trust (REIT) Hyprop Investments on Friday announced a distribution of 472c per combined unit – up 11.3% on that of the 2013 financial year.

CEO Pieter Prinsloo told a media briefing in Johannesburg that the performance was driven by strong distribution growth of 13.1% in the second half of the year, largely owing to good performances by the super and large regional shopping centres in the company’s portfolio, savings on interest costs and the acquisition of property fund African Land Investments in December.

The company’s net asset value rose 11.1% to R76.02, largely as a result of an increase in the independent valuation of the investment property portfolio.

“Investment property was independently valued at year-end and increased from R19.8-billion in June 2013 to R25.6-billion. This increase was driven primarily by income growth and the acquisition of Somerset Mall and the Manda Hill shopping centre, in Zambia, though the African Land acquisition,” he said, adding that, similarly, total property assets were up 17.5% to R26.4-billion.

OCCUPANCY
Occupancy levels across the portfolio remained high at 97.6%, while retail vacancies decreased from 2.1% in 2013 to 1.2% in 2014.

Vacancies in the office portfolio, which constituted 5% of the REIT’s gross lettable area, however, increased from 8.1% to 13.8%.

“In line with our strategy, Hyprop continues to pursue the disposal of its standalone offices. In future, the only office space in our portfolio will be the space attached to our retail centres, and we’ll probably even stop reporting it separately,” he outlined.

EARNINGS HIKE
Distributable earnings from regional, large regional and super-regional malls, excluding Somerset Mall, was up 9.5%, with average growth of 11% from The Glen, Clearwater Mall and Woodlands Boulevard centres, in Gauteng.

Property expenses were well controlled with a cost-to-income ratio of 34.4%. 

The total cost-to-income ratio increased slightly, from 35.1% in 2013, to 37.3% in the period under review, owing to a reduction in income from listed investments following Hyprop’s disposal of its stake in the Sycom Property Fund, as well as the one-off consolidation of fund management costs when Hyprop bought 87% of African Land.  

Hyprop’s Rosebank Mall, in Johannesburg, continued to be impacted by the redevelopment programme, which was on track for final completion in September.

“This saw distributable earnings decrease by R16.1-million, in line with budget,” noted Prinsloo.

Net interest on borrowings was 3.6% higher year-on-year as a result of proceeds from various disposals, amounting to R205-million in total, reducing short-term funding requirements. 

PROPERTY DEVELOPMENTS
Prinsloo said he was pleased with the progress made at the Rosebank Mall redevelopment, noting that final completion would be marked by the opening of a flagship Woolworths store in September. 

Post year-end, new store openings included River Island, Edgars, Dischem and Clicks. 

The centre was fully let and total capital cost remained within the budget of R932-million at an estimated yield of 7%.

While the Rosebank Mall was Hyprop’s largest redevelopment, several other initiatives, including tenant relocations, improvements and refurbishments were undertaken during the year at a cost of R58.8-million. 

“This is in line with our strategy of maintaining our quality portfolio and improving the tenant mix,” he commented.

THE CONTINENT
Looking elsewhere in Africa, during the year, Hyprop received dividends of R4.8-million from property group Atterbury Africa – in which it holds a partial stake –and R30.3-million from African Land.

Hyprop further advanced its African strategy with the restructure of African Land, in terms of which Hyprop, through Hyprop Investments, would now hold 50% in Manda Hill, African Land’s only asset. 

Following the restructure, Hyprop’s effective interest in Manda Hill would be 68.75% – down from 87%. 

Hyprop expects dividend growth of between 10% and 12% for the full year to June 2015.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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