Quality retail portfolio the key — Hyprop  
Nick Wilson

Property Correspondent

A STRONG retail property portfolio helped drive listed property loan stock company Hyprop Investments’ distribution up 21% for the six months to June.

Hyprop CEO Pieter Prinsloo (pictured) said yesterday that the increase to 110c a unit for the period was due to a strong performance from the company’s “quality retail portfolio”.

Prinsloo said this was supported by rental increases on lease renewals and the annual escalation of contractual rentals.

“The buoyant retail market also fuelled a good increase in turnover rental,” he said.

Prinsloo said the results were also boosted by reduced finance costs.

Although the retail market is expecting a slowdown as consumer demand cools after the recent interest rate hikes, Prinsloo is upbeat about Hyprop’s retail portfolio.

About 90% of Hyprop’s portfolio consists of retail property, with offices making up 10%.

“We foresee a moderate slowdown in consumer spend in the next 12 months. We are covered because we work on lease agreements and we set up long-term leases of 5-10 years. Only 15% of leases are due for expiry next year.”

Prinsloo said this limited Hyprop’s exposure to any short-term downward trend in consumer spend.

But he said Hyprop expected consumer demand to remain strong over the next two to three years.

“Hyprop’s position is positive because our vacancies are low. They are about 2% and we have a strong demand for retail space,” he said.

Hyprop’s properties total about R5,7bn.

The company also experienced a substantial increase in the value of its retail properties during the period.

Hyprop’s flagship shopping centre, Canal Walk, increased in value by R300m during the six months to June.

Canal Walk is now valued at R2,8bn. Hyprop bought its interest for R1,16bn three years ago.

During the period Hyprop bought a further 18ha of land in Greenstone Park, Modderfontein, for R51m to develop Stoneridge, a retail centre.

The site will be developed by Abland, which will own 10%, with Hyprop retaining 90%.

Prinsloo said Stoneridge was still in the planning phase. “We want to start development before the end of the year.

“We are always looking for acquisitions but the kind of retail assets Hyprop looks for are not readily available,” he said.

Ndabe Mkhize, investment analyst at Coronation Fund Managers, said Hyprop had reported a “very strong set of results”.

Mkhize said that of the distribution growth increase, 12,5% was rental income growth driven by rental increases on renewal of leases and contractual escalations, and the increase in turnover rentals.

He said about 5,8% came from savings on interest expenses resulting from the restructuring of debt.

“We are expecting strong full-year results from Hyprop,” said Mkhize.