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Eastern Europe jacks up Hyprop dividend

The specialist shopping centre owner Hyprop Investments achieved double-digit dividend growth in the six months to December, with strong performances from its top malls being boosted by its recently acquired Eastern European portfolio.
Somerset Mall. Image source:
Somerset Mall. Image source:
The real estate investment trust declared a dividend of 347.3c per share for the period, 16.6% up on the corresponding period in 2015. CEO Pieter Prinsloo said despite a slowdown locally in trading density, especially among fashion retailers, demand for retail space in Hyprop's centres was strong, which was reflected in the group's low vacancies and rental arrears. Retail vacancies were below the industry average at 0.8%.

"The R15.8m H&M installation at Somerset Mall and R31m Checkers store at Atterbury Value Mart opened successfully in the period, with both retailers recording excellent trading numbers," said Prinsloo.

Extensions and refurbishments valued at R260m were under way in Hyprop's South African portfolio.

As much as 4,300m² of retail would be added to Rosebank Mall. Some commentators have speculated that Swedish retailer H&M will open a store in the new retail space.

There would also be an additional 1,200m² of retail added to The Glen and Canal Walk's La Piazza will be reconfigured to expand the retail space offered at the Western Cape centre.

Hyprop also disposed of noncore assets including Somerset Value Mart, Glenfield Office Park and Willowbridge South.

The company said its Willowbridge North mall was set to sell for R225m in a few months, pending regulatory and contractual approvals.

Prinsloo said the group would continue looking at opportunities to dispose of their standalone office buildings. Vacancies in the office portfolio improved to 3.9% from 4.5%.

He said Hyprop's move into southeastern Europe had been successful so far. The company entered the region in February.

Hyprop's southeastern European malls added R58.4m to income and 23.5c to the group's dividend during the period.

Hyprop has acquired a 60% share in three malls in Montenegro, Serbia and Macedonia that was funded with low-interest Euro bridge funding. The bridge funding would be refinanced with term funding in tranches during 2017 at an average interest rate of 3-4%.

Prinsloo said he was confident about Hyprop's new footprint in southeastern Europe.

"Each of our three new centres dominates its respective area, as per our local and African portfolios, and offers quality retail to consumers," he said.

The group's African portfolio came under pressure during the period. Distributable earnings from Ikeja City Mall in Nigeria were excluded from the results given the backlog in clearing foreign exchange orders and will be included once the Nigerian foreign exchange market "had normalised".

Evan Robins, listed property manager of Old Mutual Investment Group's MacroSolutions boutique, said Hyprop had to manage investments in two continents with mixed results. "Local property operations [are] predictably solid as you would expect from a portfolio of their calibre, but conditions are slowing. Their African acquisitions have destroyed value. Hyprop increased distribution guidance, which had been notably overconservative before, and there could be the possibility of additional growth," said Robins.

Hyprop revised its dividend growth from 10% to about 12% for the full year to 30 June 2017.

Source: Business Day


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