JSE-listed real estate investment trust (Reit) Hyprop continued to deliver strong growth in a tough economic environment, with a total dividend a share of 756.5c declared for the financial year to June 30.
This growth was 8.8% higher than in the prior financial year, the company said on Friday. Against this backdrop, the Reit’s distributable earnings increased by 10.5%, mainly owing to strong organic growth and successful acquisitions in the South East European portfolio, which accounted for 12% of total distributable earnings, and an improvement in the South African portfolio in the second six months of the financial year.
CEO Pieter Prinsloo explained that, in the second half of the year, distributable earnings increased by 6% following the re-tenanting of the vacated Stuttafords stores and completed upgrade and extension work at The Glen and Rosebank Mall. Prinsloo remains confident in the quality of the local retail portfolio, which was supported by positive trends such as declining vacancies, to 1.9% from 2.4% last year, despite the challenging retail landscape.
“Total tenant arrears still make up only 0.6% of total rentals which is well below market norms,” he said at a presentation of the company’s results on Friday. He added that the group is focussing on rightsizing existing store spaces to assist tenants in the current retail market and accommodate new tenants not yet represented in Hyprop’s malls.
The group continued to strengthen its balance sheet through an oversubscribed equity raise, extending the average loan term and paying off R1.95-billion of debt. An accelerated bookbuild in May 2018 saw the issue of 7.5-million new shares at R105 a share to raise R782.6-million.
In March, Hyprop issued two long-term corporate bonds, a R452-million five-year bond and a R348-million seven-year bond, respectively. Prinsloo said the R276-million capital expenditure (capex) programme in the year was a success, with all four major retail projects completed on time and under budget and showing an improvement in footfall since completion. The successful optimisation of the portfolio in line with the group’s strategy enables Hyprop to focus exclusively on its proven core strength of managing prime shopping centres, Prinsloo elaborated.
Meanwhile, in South Eastern Europe, Prinsloo said, Hyprop continued to reap the benefit of well-performing assets, including recent acquisitions.In sub-Saharan Africa, following prior currency constraints in the previous financial year, the re-inclusion of distributable earnings from Ikeja Mall, in Nigeria, boosted distributable earnings growth for the year. Looking ahead, Prinsloo believes the demand for space remains strong and that Hyprop will continue to assess expansion opportunities “given the healthy retail environment in the region”.
For the 2019 financial year, Hyprop executive director Wilhelm Nauta highlighted that the company’s focus will be on South Africa and the European Union. Hyprop’s dividend growth forecast for the year ahead is between 5% and 7%, mainly owing to the constrained consumer landscape in South Africa, as well as a lack of economic growth.