This represents a substantial increase on its initial forecast of 7% growth.
Hyprop’s distributions to unitholders surged 18% for the six months to June, driven mostly by an increase in income from its retail property portfolio.
Hyprop, with 90% of its property portfolio made up of regional shopping centres, has paid its distribution of 91c for the six months to June.
MD Pieter Prinsloo said yesterday Hyprop’s retailers were "definitely benefiting" from "strong consumer spend", which improved rental income for the company. Prinsloo said nonrecurring income of about 4c a unit contributed to the "exceptional growth" in distributions.
He said this nonrecurring income arose from a reversal of a previous bad-debt provision at Cape Town’s Canal Walk and distributions received by Hyprop on its 14,9-million linked units in listed property loan stock company, SA Retail Properties. Had this been excluded, Hyprop would have had a 13% distributions rise for the six-month period.
Prinsloo said Hyprop benefited from the interest rate cuts as it was paying less interest on its loans. The company said since December last year, net asset value had risen 10% to R19,54 a unit following an 8% increase in the fund’s portfolio valuation to almost R4bn. The increased portfolio value has kept borrowings at 28% of total portfolio value.
First South Securities property analyst Leon Allison said Hyprop’s "guidance" for distribution growth for this year had increased from 7% to 12%, which was "positive". He said Hyprop was achieving the highest distribution growth of the 10 largest listed property funds, which included, among others, Growthpoint, Grayprop and Sycom.
Catalyst Securities MD Andre Stadler said the results represented a company that had a "portfolio in the right place, being retail".
Stadler said one of Hyprop’s major assets, Canal Walk, had "represented a significant turnaround opportunity" for the company, which had managed to slash vacancies at the shopping centre and improve the retail offering.
"In addition, they have benefited from interest cost savings and now it would appear their office vacancies have also reduced. These positive results are not surprising," said Stadler.
About 10% of Hyprop’s property portfolio consists of offices. Hyprop, which owns a 50% undivided share in a 28000m² shopping centre under development on the KwaZulu-Natal south coast, said the centre was scheduled to open in November this year.
The company said its total investment of R96m in the centre was expected to yield an initial 11,5% return.
Hyprop’s units closed at the end of December last year at R19,75 and closed at the end of June at R23, which represented a 16,5% increase.
This month Hyprop’s units have been trading above R26. The share price closed at R26,50 on Monday. Using R26 as the trading price, the price growth to date is about 31,6%.