Shopping Mall Investor reaps reward of portfolio growth
Shopping centre specialist, Hyprop Investments (JSE:HYP) posted double-digit distribution growth for the year to June on the back of consumer spending that supported its property portfolio in the retail sector.
The Real Estate Investment Trust (REIT), which owns Rosebank Mall north of Johannesburg, declared a total distribution of 619.9c per 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 per share.
Hyprop CEO Pieter Prinsloo attributed the results to various factors that had contributed to the growth in distributable earnings including an 8.7% growth in distributions from the South African portfolio, additional income from acquisitions in Nigeria, Montenegro and Serbia, and the opening of Achimota Retail Centre in Ghana.
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The company reduced vacancies in its SA retail portfolio to 0,8% from 1,3% in June 2015. Vacancies in office portfolio also improved to 4,5% from 8,3% in June 2015.
During the year Hyprop‚ which operates a portfolio of shopping centres in across sub-Saharan Africa‚ expanded into South-Eastern Europe‚ with the acquisition of a 60% interest in Delta City Belgrade‚ Serbia‚ and Delta City Podgorica‚ Montenegro.
"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," Prinsloo said.
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Post year-end, the disposal of non-core assets continued with sale agreements for Somerset Value Mart and Glenfield Office Park for R185 million and R180 million, respectively.
“We continued to enhance the existing portfolio with R178 million spend in capital projects, replacement of equipment and tenant installations,” says Prinsloo. 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 R167 million are currently in planning.
Grindrod Asset Management’s chief investment officer, Ian Anderson, said Hyprop’s results were consistent with market expectations.
"They’re about as good as most of the sector when analysed properly. Like-for-like growth in net property income of 7.4% is only just above the sector average, which is good, but not great. The real kicker in these numbers is the reduction in the cost of debt-funding relative to the new income introduced, through acquisitions," Anderson said.
"Despite adding more than R2bn in new debt, the net interest paid by Hyprop has hardly budged," he said.
"Financial year 2016 was more about the balance sheet than the properties and the income statement, hence the growth is not sustainable into financial year 2017, although I do expect the 10% growth forecast by management includes a little more of the same."
Evan Robins, the listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said Hyprop’s defensive portfolio had fared well during the reporting period. "These are good results, but don’t forget that Hyprop has the advantage of having the best South African portfolio in the property sector, with some leading shopping centres, so it should do well.
"Core rental growth was strong and vacancies were reduced," he said.
Looking ahead, Hyprop expects dividend growth of approximately 10% for the full year to 30 June 2017.