Continuing its trend of sustainable distribution growth, Hyprop Investments Limited ("Hyprop") (JSE: HYP) today announced an interim distribution of 231 cents per unit for the six months to December 2013, up 9,5% on the corresponding period in 2012.
CEO Pieter Prinsloo says the portfolio's resilience was driven by the continued strong performance at Hyprop's shopping malls. Distributable earnings from regional and super-regional malls (excluding Somerset Mall) was up 9,6% benefitting in part from extensions at Canal Walk and The Glen. The property cost-to-income ratio improved to 33,1% from 34,4% due to timing delays in operating cost expenditure.
Ongoing demand for space at Hyprop's shopping malls remains strong with vacancies of less than 1%. Occupancy levels in the total portfolio increased to 98,2% (June 2013: 97,3%), reducing retail vacancies to 1,2%. Office vacancies saw a slight increase from 8,1% to 8,2%. "In line with our strategy to maximise opportunities in the portfolio, extensions were completed to Edgars and other stores at The Glen and Canal Walk, on time and within budget."
The total portfolio value grew from R22,5 billion to R25 billion, primarily due to developments, the acquisition of African Land and a fair value adjustment of R658 million. Excluding Somerset Mall, the value of investment property increased by 4,9%, driven by income growth, supported by strong demand for quality shopping centres.
Prinsloo says he is pleased with the progress of the Rosebank Mall redevelopment, which remains on track for completion in September 2014, with lease commitments at 98% and 30 new stores already open.
Sub-Saharan Africa (excluding South Africa)
During the period Hyprop made further strides in its investment strategy in the rest of Africa with the acquisition of 87% in African Land for R768 million gaining exposure to Manda Hill in Lusaka, Zambia.
In line with Hyprop's strategy to become a dominant African shopping centre REIT, Hyprop intends to invest up to R3 billion in sub-Saharan Africa (excluding South Africa) over the next five years, up from the original R750 million. "These African investments are already contributing to distributable earnings", says Prinsloo referring to the R2,5 million and R3,8 million received from Atterbury Africa and African Land, respectively.
Net borrowings increased to R6,7 billion, mainly due to the acquisition of African Land, capital expenditure on the Rosebank Mall redevelopment and developments in Atterbury Africa. Hyprop's debt capital markets issuances stand at R2,1 billion, or 30% of total borrowings, following the issuance of a R450 million six-year bond in November 2013.
Energy saving initiatives
As part of its Green Design and Environmental Strategy, Hyprop commenced with an R11,5 million electricity reduction project. "Once completed, the project is estimated to save Hyprop around R9,7 million in electricity cost annually," says Prinsloo.
Looking ahead Prinsloo says the challenging economic environment is expected to decrease consumer spend. However, he is confident that Hyprop with quality assets, strong contractual lease escalations and sound balance sheet is well-positioned to withstand any negative impact."
Hyprop has improved its distribution growth forecast to between 8,5% and 10,5% for the full year to June 2014 primarily due to the anticipated benefit from African Land for the rest of the financial year and strong net income growth from the existing portfolio.
Combined units in Hyprop closed yesterday at R73.79.