Hyprop expansion plans includes Africa

JSE-listed retail property fund, Hyprop, says its planned foray into Africa as part of its pipeline over the next few years will be cautious.

Speaking after the announcement of the company’s results for the six months to June 2012, CEO Pieter Prinsloo, said: “We’re going in a small way. We sit with assets of R20bn, so to invest R750m over the next couple of years is… very measured.”

Prinsloo said Hyprop wanted to test the risks and returns by investing into Africa. If the returns are good, the company will go bigger. “The investment will be small scale relative to the size of the company,” Prinsloo explained.

The property company already has a toe in the rest of Africa’s waters through its co-investment with the Atterbury Group in Atterbury Africa Limited. “Our main focus is to primarily develop and own quality shopping centres in Africa, which as a growing emerging economy offers substantial opportunities.”

It’s in this regard that Prinsloo says Hyprop has an initial shareholding of 37.5% and has committed to invest a further R750m over the next five years. Atterbury Africa recently bought a 42.5% interest in the Accra Mall in the Ghanaian capital.

Ghana, like many other African countries has a growing middle class with an ever increasing disposable income, making it an exciting growth prospect.

Prinsloo says the plan is to develop further shopping centres ranging from between 20 000 and 30 000m² in Ghana, Mozambique and Zambia. He says currently the market in South Africa is very competitive, especially in terms of the availability of high quality shopping centres which is Hyprop’s niche.

Prinsloo adds: “We’ll still invest in South Africa if we can find the right opportunity to do so.”
Announcing the company’s results for the six months to June, Hyprop reported distribution growth of 9.4% at 198c a unit, while revenue surged to R1.06bn from R563.8m a year earlier.
Prinsloo has attributed the performance to, among others, a number of macro-economic positives and operational successes. The CEO says trading conditions were stronger, particularly at the larger malls while the company achieved savings on interest costs and a healthier performance from the Southern Sun Hotel. It also derived greater benefit from its investment in Sycom and that company’s improved performance.

Commenting on the company’s R135m cash reserve, Prinsloo said some of this had to do with timing in line with Hyprop’s stated strategy to sell off non-core assets. Its 50% undivided share in the Southcoast Mall was sold to Redefine Properties for R110.5m. it also disposed of its investment in the Vunani Property Investment Fund for R101m while agreement was reached in June this year for the sale of the Trade Centre property in the CapeGate precinct for R70m.
The company’s development focus for the rest of the year will remain the refurbishment and expansion of the Rosebank Mall north of Johannesburg. The project will almost double the mall’s retail space from 36 000 to 62 000m² at a cost of around R920m. The expected yield is around 7%.

Extensions to Canal Walk in Cape Town are also planned to meet rising tenant demand as well as the upgrade of Willowbridge South in Cape Town’s northern suburbs.  

In western Joburg the Clearwater Mall extensions were completed at a cost of almost R13m and an incremental yield of 13.1%.

In conclusion, Prinsloo said Hyprop would continue its strategy of expanding and enhancing existing shopping centres while disposing of non-core assets.

Leon Allison, Property Analyst at Macquarie First South, has described the results as “quite strong in a challenging environment” and marginally better than some might have expected.


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