Shopping centre-focused real estate investment trust Hyprop reported strong double-digit growth in distributions for the six months to December, 31, owing to a solid performance from its local shopping centres and supported by the inclusion of distributable income from the newly acquired south-eastern European portfolio, which added R58.4-million to income.
The inclusion further boosted the company’s dividend by 23.5c, with Hyprop declaring a dividend of 347.3c a share for the period, 16.6% higher than in the corresponding period in 2015.
Hyprop acquired a 60% share in three malls in Montenegro, Serbia and Macedonia, funded with low-interest euro bridge funding, which will be refinanced with term funding in tranches during 2017 at an average interest rate of 3% to 4%.
In a statement, CEO Pieter Prinsloo said he was positive about Hyprop’s new footprint in south-eastern Europe. “Each of our three new centres dominates its respective area, as per our local and African portfolios, and offers quality retail to consumers.”
Trading conditions in the region also remained promising with foot count and turnover growth exceeding the Eurostat inflation rate. He added that demand for space from the fashion anchor tenants was robust and mall expansions were already in planning.
Meanwhile, Prinsloo pointed out that, despite a slowdown locally in trading density, especially among fashion retailers, demand for retail space in Hyprop’s centres remained strong, as reflected in the below industry average vacancies of 0.8% and low rental arrears.
The R15.8-million H&M installation at Somerset Mall and R3-million Checkers store at Atterbury Value Mart opened successfully in the six months to December 31, with both retailers recording excellent trading numbers.
A further R260-million of extension and refurbishment developments are under way in Hyprop’s South African portfolio to enhance the quality retail offering. Specifically, 4 300 m2 of retail will be added to Rosebank Mall and an additional 1 200 m2 of retail to The Glen, and Canal Walk’s La Piazza will be reconfigured to expand the retail space.
The disposal of noncore assets continued with Somerset Value Mart, Glenfield Office Park and Willowbridge South sold. In addition, Willowbridge North is set to sell for R225-million in the months ahead, pending regulatory and contractual approvals.
Prinsloo noted that the group would continue looking at opportunities to dispose of its standalone office buildings, despite vacancies in the office portfolio improving to 3.9% from 4.5%.
Looking ahead, he remained confident that the strategy of investing in high-quality, well-located, dominant shopping centres in diverse emerging markets would position Hyprop for continued growth. Notwithstanding ongoing tough conditions in South Africa, Hyprop has revised its dividend growth from 10% to 12% for the full year to June 30.