Property loan stock company Hyprop expects to see good growth in 2010, despite the property market “entering a period of lower distribution growth”.
The company, which reported a 14,1% growth in its total distribution for the year ended December 31, 2008, expected to achieve distribution growth of between 7% and 8% in 2009, outgoing CEO Pieter Prinsloo commented on Monday.
Prinsloo expected 2009 to be a difficult year, but remained upbeat about the prospects of the company, as it had high-quality assets, low gearing and a healthy balance sheet.
He noted that there would be a slowdown in its tenants’ turnovers, a further slowdown in consumer spending and that some of its collections could slow down in the year ahead.
However, if the market conditions remained relatively stable, the company expected to achieve a distribution growth of between 328c and 332c.
Meanwhile, Hyprop would continue to focus on bringing down its vacancy levels, which Prinsloo said would not necessarily increase.
Vacancy levels had increased to 3,3% in the year ended December 31, 2008, compared with 1,5% the year before.
Hyprop noted that this was mainly attributable to vacancies at the new Stoneridge Centre, in Johannesburg, which opened its doors in September last year, as well as vacancies at the Canal Walk offices, in Cape Town.
Nevertheless, the anchor tenants at the Stoneridge centre had done well in terms of their performance in the year, with early indications of trading looking promising.
Prinsloo said that although there was a 15% vacancy rate at the centre, a figure Hyprop would aim to reduce going forward, the long-term prospects for the centre were still positive.
The vacancy levels at its other assets were low and were expected to remain that way.
Meanwhile, Hyprop was also continuing with its R662-million expansion programme, which would be completed in 2009 and would enhance the value of the company’s retail assets.
The programme included the R206-million expansion programme at Canal Walk, and, in Johannesburg, a R278-million expansion at The Glen and the R179-million Southern Sun hotel, which Hyprop is building at the Hyde Park shopping centre.
The developments were being funded through debt, which the company had already secured, with a new R500-million loan from Standard Bank having been concluded early this year.
Once completed, these developments would increase the company’s gross lettable area by between 11% and 12%.
Prinsloo said that South African banks were still in a healthy position and that they did not see the South African listed property companies as a big credit risk.
South African listed property companies also tended to have lower levels of gearing than their European, North American and Australian counterparts, said Hyprop financial director Laurence Cohen.
Hyprop’s gearing stood at 8,9%, with borrowings at the end of 2008 amounting to R834-million.
The company said that this favourable gearing would also enable it to borrow up to R3,7-billion, which it could use if any acquisition opportunities came up.
However, Prinsloo noted that there were currently no assets attracting its attention, with the properties it would consider buying not for sale.
Meanwhile, Hyprop was still looking for a new CEO, following the resignation of Prinsloo to pursue other property development opportunities.
Chairperson Michael Aitken noted that it was in the process of looking for a successor for Prinsloo, but said that the company wanted to ensure that it hired the correct candidate.
In the meantime, Hyprop had competent and experienced teams at all levels to ensure that the day-to-day running of the company was conducted as usual.