Specialist shopping centre REIT, Hyprop reported double-digit growth for the year ended 30 June 2016 off the back of its defensive quality shopping centre portfolio. Hyprop declared a total distribution of 619,9 cents 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 322,10 cents per share.
CEO Pieter Prinsloo explains that a number of factors 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 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% in June 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, due to new lettings at Lakefield Office Park and Hyde Park offices,” says Prinsloo.
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 include Delta City Podgorica in Montenegro and Delta City Belgrade in Serbia, which became effective in February and April 2016, 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,” comments Prinsloo. The acquisitions were funded with EUR denominated loans.
“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.
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.
The group increased its loan-to- value ratio to 30,8% from 22,9%, largely due to new acquisitions and developments. Subsequent to year-end, a maturing South African bank facility of R1,2 billion was re-financed with debt capital market (DCM) funding, increasing the ratio of DCM funding of total debt to approximately 25%. All of Hyprop’s DCM funding is unsecured.
Post year-end, R700 million equity was raised, when 5,2 million new shares were issued at R135 per share.
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 approximately 10% for the full year to 30 June 2017.