The defensive qualities of Hyprop’s shopping centres helped the company overcome pressured consumer spend.  Looking to enhance the value of its existing retail assets, Hyprop began its R662 million expansion programme during the year.

Revenue at Hyprop’s centres in Gauteng, the Cape and KwaZulu-Natal rose 13.9% to beat escalating costs, with net income up 13.1% on a like-for-like basis. 

CEO Pieter Prinsloo, who in January 2009 announced his resignation, attributes the pleasing results for the year to consistently high occupancy at Hyprop’s centres and strong demand for retail space regardless of weakened trading conditions. “Average rental growth was 14% year-on-year,” he says, “with ongoing requests for space at our well located centres”.

Hyprop enjoyed a considerable increase in net income from listed property securities by including for the full year its 37% stake in Sycom Property Fund, valued at R1,4 billion.  (The same investment was included in 2007 for only three months from the purchase of the Sycom units in October 2007.)

Hyprop’s extensive development and expansion programme saw the start of six standalone retail pods at Canal Walk at a cost of R206 million, adding 15 500m² of retail space; a R278 million expansion programme adding 19 400m² retail space and 1 100 parking bays to The Glen and an R179 million four star hotel at Hyde Park Shopping Centre.  Prinsloo says the company is satisfied with the progress during 2008 and all developments remain on track for completion during 2009. 

The developments will be funded through debt already secured.  A new R500 million loan from Standard Bank was arranged early in 2009.  Prinsloo says despite the restricted credit environment, Hyprop was able to secure this debt funding at a favourable interest rate fixed for five years.  Borrowings at year-end totalled R834 million to keep gearing low at a favourable 8,9%.   

Total vacancies at year-end of 3,3% showed a marginal increase on the previous year due to the newly-opened Stoneridge and vacancies at Canal Walk offices. Excluding Stoneridge, vacancies notably remained below the industry average at only 1,5%.

Stoneridge has added 50 000m² of prime retail space to Hyprop’s portfolio. The
R571 million lifestyle centre is anchored by a Spar Supermarket, a Fruit & Veg Food Lover’s Market and a Virgin Active Gym. “Early indications of trading have been promising with the centre expected to benefit from the increasing residential developments in the high growth node,” says Prinsloo.  He adds that the national anchor tenants have continued to return a respectable performance, which bodes well for the future of the centre.

Notwithstanding tough trading conditions ahead, Hyprop’s board remains cautiously optimistic about future performance to year-end in December.  Prinsloo says Hyprop has the competitive advantages of quality assets and low gearing with a healthy balance sheet, which should position the company to withstand the negative effects of the global economic meltdown.  He emphasises that consumer spend has already endured a downward trend since August 2007, during which time Hyprop has nonetheless continued to deliver solid returns to unitholders.

“If market conditions remain relatively stable, albeit adverse, Hyprop expects a distribution of between 328 and 332 cents a unit for the 2009 year.” 

With the Madison contracts set to expire at the end of the year, Hyprop Chairman Michael Aitken says the board will be making a considered decision on the way forward taking a number of factors into account.  “Madison has in the past, and continues to add considerable strategic value.  This will be balanced against such issues as the roll-out of the proposed Madison/Redefine merger in time and the fact that Redefine is Hyprop’s largest single unitholder.

Of Prinsloo’s successor, Aitken says the board has prioritised the appointment of a new CEO.  He says in the interim the day-to-day operations of Hyprop will not be affected.  “Hyprop is a very well resourced company with competent, experienced teams.  In the interim the two existing executives will continue to run the company, supported by Madison and the board.”