Specialist shopping centre real estate investment trust Hyprop has reported double-digit growth for the year ended June 30, off the back of its defensive quality shopping centre portfolio.
Hyprop declared a total distribution of 619.9c a share for the full year, up 14.2% on the prior year, with the dividend for the six months to June increasing 14.9% to 322.10c a share.
CEO Pieter Prinsloo attributed the growth in distributable earnings to a number of factors, including an 8.7% growth in distributions from the South African portfolio, additional income from acquisitions in Nigeria, Montenegro and Serbia during the year and the opening of Achimota Retail Centre in Ghana.
Demand for retail space remained strong, with vacancies in the South African portfolio reducing to 0.8% from 1.3% as at June 30, 2015, as a result of new lettings at Somerset Mall, Willowbridge and Somerset Value Mart.
“Vacancies in our office portfolio also improved to 4.5% from 8.3% in June 2015, owing to new lettings at Lakefield Office Park and Hyde Park offices,” Prinsloo said.
The year was marked by Hyprop’s expansion into south-eastern Europe, with the acquisition of a 60% share in two Delta City Malls. The acquisitions included Delta City Podgorica, in Montenegro, and Delta City Belgrade, in Serbia, which became effective in February and April respectively.
“These acquisitions are an attractive investment as they complement our strategy to acquire or develop high-quality, income-producing shopping centres in emerging markets and implementation is progressing well,” commented Prinsloo.
“We continued to enhance the existing portfolio with R178-million spend on capital projects, replacement of equipment and tenant installations,” he said.
Current projects include the installation of H&M at Somerset Mall and Checkers at Atterbury Value Mart, while extensions to Canal Walk and Rosebank Mall with an estimated project cost of R16-million are in planning.
Post year-end, the disposal of noncore assets continued with sale agreements for Somerset Value Mart and Glenfield Office Park for R185-million and R180-million, respectively.
The group increased its loan-to-value ratio to 30.8% from 22.9%, largely as a result of new acquisitions and developments.
Subsequent to year-end, a maturing South African bank facility of R1.2-billion was refinanced with debt capital market (DCM) funding, increasing the ratio of DCM funding of total debt to about 25%. All of Hyprop’s DCM funding is unsecured.
Post year-end, R700-million in equity was raised through the issue of 5.2-million new shares at R135 apiece.
Looking ahead, Prinsloo is confident that the strategic approach of investing in high-quality centrally located centres in emerging markets positions Hyprop for future growth.
Notwithstanding difficult trading conditions in South Africa, Hyprop expects dividend growth of 10% for the full year to June 30, 2017.