THE PREMIUM SHOPPING DESTINATION – AFRICA - JSE MAGAZINE

THE PREMIUM SHOPPING DESTINATION – AFRICA

Hyprop’s location of top-quality shopping centres enables the group to capitalise on opportunities across Africa

Hyprop is Africa’s leading specialist shopping centre real estate investment trust. Started in 1988, it is one of SA’s oldest listed property companies. Hyprop operates an internally managed portfolio of shopping centres in major metropolitan areas across SA.

The core portfolio consists of premier malls such as the super regional centre Canal Walk; large regional centres Clearwater Mall, The Glen Shopping Centre, Woodlands Boulevard, CapeGate Shopping Centre, Somerset Mall and Rosebank Mall; and the regional centre Hyde Park Corner.

Hyprop has a growing presence in sub-Saharan Africa (excluding SA) through AttAfrica, a joint venture between Hyprop, Attacq Limited and the Atterbury Group, and through Manda Hill Mauritius, a joint venture between Hyprop and AttAfrica.

The sub-Saharan African portfolio includes shopping centres Accra Mall and West Hills Mall (both in Accra, Ghana), and Manda Hill Centre in Lusaka, Zambia.

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Performance
Hyprop’s structure provides a sustainable foundation for growth with 11 prime shopping centres in SA. Its quality assets, strong contractual lease escalations and sound balance sheet ensure that the company is well positioned to weather the impact of a challenging economic environment.

The location of Hyprop’s assets and their dominance in terms of average size, make them attractive to new concept and flagship stores, and the preferred location for international brands.

These characteristics provide defensive qualities in an economic downturn while relatively low gearing and undrawn facilities enable the company to benefit from new opportunities as they arise. In SA, all assets are internally managed by capable, experienced teams. Hyprop’s hands-on management approach allows the group to effectively optimise returns on investment. Valued at R27.1 billion (as of 31 December 2014), Hyprop ranks fifth in its sector by market cap and third by FTSE/JSE SA Listed Property Index’s weighting.

Its proven track record of consistent growth in returns is evidenced in the 13.7% growth in distributions, net asset value (NAV) per share increase of 7.2% and a total return of 25.9% for the six months to 31 December 2014.

In the last decade, Hyprop’s total return on investment has been 32% with a distribution yield in rand terms of more than 11% per year. NAV growth per year has been 20%.

Hyprop is well placed to capitalise on the opportunities across Africa. All investments in sub-Saharan Africa (excluding SA) are held through Hyprop Investments Mauritius, a wholly owned subsidiary of Hyprop. The 27 500m² West Hills Mall in Accra, Ghana, opened in November 2014. Construction is under way at Achimota Mall in Accra (completion date October 2015) and Kumasi City Mall, Kumasi, Ghana (completion date 2017). Hyprop will have an effective shareholding of 28.1% in both these malls.

Future Focus
Pieter Prinsloo, Hyprop’s CEO, speaks about his company’s approach to expansion, safety in malls and load shedding.

Q: What is Hyprop’s approach to expansion and renovation of portfolio properties?
A: Hyprop’s strategy is to continuously improve and maintain the quality of our existing portfolio through redevelopments, extensions and refurbishments. Redevelopments relate to extensive refurbishments to modernise shopping centres in line with evolving customer and retailer needs. Extensions are tenant-driven enlargements of existing stores or the entry of new stores. In line with Hyprop’s strategy to maintain a quality shopping centre portfolio, several projects are under way across the portfolio.

Q: What is Hyprop’s approach to safety in these shopping centres?
A: Safety at all Hyprop properties is an ongoing priority for the company. Each property has a team of security personnel (uniformed and plain-clothed staff), who monitor these shopping centres and their parkades for any irregular activities or security breaches. Security technology is also upgraded frequently in each shopping centre. When necessary, security personnel work in conjunction with the South African Police Service to ensure the safety of all stakeholders.

Q: What is your approach to load shedding?
A: To date, Hyprop has not experienced significant down times as a result of load shedding due to the trading hours of our shopping centres and the load shedding schedule. The cost of load shedding has therefore not had a significant impact on our trading to date.

The company is, however, installing additional generators at shopping centres that currently do not have full electricity back-up to ensure uninterrupted trading for shoppers, starting with Hyde Park Corner and The Glen shopping centres. The costs associated with installing generators are not material. At this stage, most tenants are willing to contribute to the diesel costs, and all lease renewals going forward will include generator and diesel expenses.

Hyprop is also committed to energy saving initiatives: a 500 kWp solar photovoltaic plant at Clearwater Mall started operating in November 2014, with positive results. The company plans further energy saving initiatives throughout the portfolio.

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Q: Traditionally the SA commercial property market has consisted of three main property classes, namely office, retail and industrial properties. Retail is considered to be the best performing asset class. Do you agree?
A: SA’s bigger retail centre assets are still sought after in the country. There is a healthy demand for space, thereby ensuring that landlords can achieve premium rentals.

Hyprop is still able to conclude strong rentals with tenants and enjoys low vacancies. Retail property is the best-performing asset class, while the lower-grade office property market has come under major pressure, with high vacancies and low rental growth. We have noticed that other listed property companies have increased their retail portfolios to change their property mix.

Q: Increasingly, local property counters are looking to diversify their portfolios by investing offshore or in the rest of Africa. Do you believe that the mature SA market offers little in the way of growth or investment opportunity?
A: The SA property market is mature in terms of what is available in the way of attractive investments. The country also suffers from low economic growth, which is encouraging listed property players to look further afield.

While SA has a mature retail market with fewer new opportunities available to investors, the rest of Africa does not have the same offering, despite a strong, growing middle-income market. SA has a prominent mall culture, where quality shopping centres perform well and large, quality malls outperform the rest of the market. The trend is for investors to focus on their existing assets, making them both bigger and better than developing new centres due to the high concentration in the market. We also see that retailers choose to invest more money in their flagships stores rather than aggressively rolling out new stores in other malls. Consumers in sub-Saharan African markets have to travel to access high-quality shopping centres. Hyprop views this gap as an opportunity to develop shopping centres in large African cities with high population densities and disposable income.

Hyprop is currently focused on Accra in Ghana and Lusaka in Zambia. There are, however, other possible opportunities in African cities, including Nairobi in Kenya and Lagos in Nigeria where there is a strong base and developed infrastructure that facilitates Hyprop building quality malls that are sustainable. We see opportunity for further development over the next 10 years.

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Pieter Prinsloo
Hyprop CEO
[email protected]
Viki Jane Watson
Hyprop investor relations manager
[email protected]
+27 (0)11 447 0090
www.hyprop.co.za