SA’s Retail Sector is in trouble but Mall Owner managed to eke out growth

Although South Africa’s economic strife has dimmed prospects for a long-term revival in consumer spending, shopping centre owner, Hyprop Investments (JSE: HYP) is still managing to eke out growth.

The precarious prospects of SA’s retail sector were confirmed by recent sales updates from major retailers, which suggested that hard-pressed consumers continue to limit their spending.

Releasing its financial results announced on Friday last week, Real estate investment trust (Reit), Hyprop Investments (JSE: HYP) managed to increase its full-year dividend to end-June by 12.1%.

The company with a R36.8bn portfolio of premium shopping centres in SA, sub-Saharan Africa and southeastern Europe, declared a total dividend of 695.1c per share for the reporting period. The balance sheet was strengthened with a 5.6% rise in net asset value to R99.78 per share and a 6.1% decrease in loan to value to 28.1%.

Its European portfolio held through a UK company, Hystead, was included for the first time for a full year. This helped drive distributable earnings up to R1.7bn, from R1.5bn at June 2016.

Hyprop’s South African portfolio continued to perform well to withstand the recessionary economy, according to CEO Pieter Prinsloo.

“There has been slowing growth in trading densities across malls in SA, but Hyprop centres continued to enjoy good rental growth and above- inflation rental escalations with low rental arrears,” he said.

The group disposed of noncore properties worth R867m in the year.

Clearwater, Hyde Park Corner, CapeGate and Somerset Mall performed well during the year, with weighted average growth in distributable earnings of 8.6%, the group said.

Trading density growth continued to slow in the second half of the year.

Excluding The Glen, trading density growth for the year was 2% from 6.7% in 2016. Trading density growth for the year including The Glen was 1.4% from 5%.

Vacancies increased to 1.9% for the year, and dropped to 1.7% post year-end. Hyprop had identified replacement tenants for major spaces vacated by Stuttafords at Canal Walk, Clearwater Mall and Rosebank Mall, which would in future improve trading densities in these stores. International fashion retailer H&M would start trading at Canal Walk in November.

Distributable earnings from the investments in sub-Saharan Africa reduced to R57m from R83.7m, largely due to the exclusion of distributable earnings from Ikeja City Mall in Lagos, Nigeria; replacement of tenants at lower rentals at Manda Hill Centre in Lusaka, Zambia; and rand appreciation against the dollar.

It purchased the Skopje City Mall in Skopje, Macedonia, for €92m in October 2016.

Hyprop is predicting dividend growth of between 7% and 9% for the year to end-June 2018.

Anaylist Comment

Evan Robins, listed property manager of Old Mutual Investment’s MacroSolutions boutique, said a more difficult retail environment was evident from Hyprop’s results but its forecast for 2018 was disappointing.

“Their guidance of 7% to 9% dividend growth in the new financial year disappointed many in the market who are used to double-digit growth from Hyprop, but current conditions are far more trying,” he said.

Article Source – SA Commercial Prop News


Seeing The Value In Canal Walk

RETAIL inclined property company Hyprop must be pleased as punch about the reassuring performance of the Canal Walk shopping centre at Century City.

In the year to end December Canal Walk increased its property revenue 14% to R388 million and pushed up its distributable earnings by roughly the same margin to R276 million in the year to end December 2010.

Outgoing Hyprop CEO Mike Rodel said that given the continued tough retail environment in 2010 Hyprop delivered in line with expectations – benefiting from completed extensions at Canal Walk.

He said Canal Walk continued to benefit from increased footfall, boosted in part by the new Boulevard Shopping project.

Rodel added that the centre underwent an extensive lease renewal cycle and was successful in achieving good growth in a demanding economic environment.

Perhaps the most intriguing statistic in the Hyprop results is the fact that the valuation of Canal Walk has grown from R4 billion at the end of 2009 to R4.6 billion at the end of 2010.

That’s a figure that needs to be put in context.

CBN readers may recall that in mid-2003 Hyprop effectively doubled the size of its largely Johannesburg-based investment portfolio by acquiring 80% of Canal Walk from Nedbank for R1 billion. The well known East Rand businessmen, the Ellerine Brothers, snapped up the other 20% for R116 million – meaning that seven years ago Canal Walk was worth just over R1.1 billion.

In effect, the value of Canal Walk has more than quadrupled in seven years – which is not a bad achievement considering that back in 2001/02 there were many pundits that thought that Cape Town had sufficient shopping centre capacity and that Canal Walk could be a dud.

What is more astounding is that since acquiring Canal Walk, Hyprop has probably generated around R1.4 billion in property income from the property. That’s a helluva return on a R1 billion investment, and certainly suggests that anyone wanting to buy Canal Walk from Hyprop would need to fork up a lot more than the official R4.6 billion valuation.

Thanks to Western Cape Business News for this article