Owner of Rosebank Mall hit by dire operating conditions
By Alistair Anderson
Mall owner Hyprop Investments’ dividends for the six months to end-December fell a fifth in one of its worst half-year performances since listing in 1988.
The company’s dividend would have fallen 13% but was worsened by its decision to pay out just 92% of its distributable income. Previously it paid out 100% to shareholders. Hyprop wanted to hold on to the cash in order to manage day-to-day costs and still meet its dividend guidance.
It declared a dividend of 308.7c per share.
CEO Morne Wilken said R40m of the distributable income held back would be spent on improving generator capacity at Capegate.
Even though the owner of Rosebank Mall, Hyde Park Corner, Canal Walk, The Glen and Capegate managed to keep its SA vacancy level down to 1.6%, the sales per square metre at these malls rose by just 0.6% in the reporting period.
Hyprop has been restructuring its balance sheet to reduce its debt level and to fill vacancies left by tenants who are battling to make profits in a weak economy.
The company, which has interests in a R48bn portfolio of shopping centres in SA, Eastern Europe and Sub-Saharan Africa, said it repaid R1.3bn worth of debt in the reporting period. This brought the loan-to-value down to 34.2% from about 35.2%.
“Trading conditions in the SA market continued to deteriorate as a result of the poor economic climate, increased levels of load-shedding and a sustained general decline in business confidence,” the company said.
Management said its malls still attracted tenants, even if its dividend was disappointing.
“While the group’s SA shopping centres are not immune to the SA economy, they have once again demonstrated their resilience in difficult times,” it said.
However, the company said trading conditions in Eastern Europe were attractive, with most markets experiencing political stability and sustained economic growth. Hyprop co-owns retail assets in Bulgaria, Croatia, Serbia, Montenegro and North Macedonia.
Ghana and Nigeria continued to show positive economic growth, but currency devaluation stunted the performance of Hyprop’s assets.
“Trading conditions for our malls and tenants in these countries have been challenging, partly due to the devaluation of the local currencies against the US dollar. We have taken various steps to preserve and enhance the value of these investments, while continuing the disposal processes,” the company said.
Hyprop also continued to reduce its exposure to embattled national retailer Edcon. As much as 16,627m² of space previously rented by Edcon in Hyprop’s portfolio has already been rented out. Edcon still rents 49,000m² of space in Hyprop’s portfolio.
Keillen Ndlovu, head of listed property funds at Stanlib, said most of the bad news around Hyprop had already been priced into its share price. “The reduction in payout ratio was communicated to the market. The share price fell a lot due to this,” he said.
“We believe that most of the negative news is in the price now as the share is trading at 50% below net asset value,” Ndlovu said.
Hyprop’s share price declined 1.27% to close at R46.50.
This article first appeared on Business Day.