JSE-listed real estate investment trust Hyprop reported a 24% increase in distributable income to R1.451-billion for the full year ended June 30, as the four Eastern European centres were consolidated for the full financial year.

The group says it delivered a continued improvement in trading metrics across its South African and Eastern European portfolios which is a result of its repositioning strategy and active asset management initiatives.

The average monthly foot count across Hyprop’s premier retail centres in South Africa grew by 5.2%, while in Eastern Europe it rose by 14.3%. At the same time, tenant turnover rose by 12.8% in the former and 15.9% in the latter.

“The robust improvement in our portfolio’s key trading metrics reaffirms our centres' dominance and relevance to retailers and shoppers.

“Even though we faced challenges such as power and water shortages, spikes in energy costs, service delivery failures, higher interest rates, geopolitical tensions and muted economic growth, our retail centres increased their strong market positions,” highlights CEO Morné Wilken.

At the end of June, the group was indicated to be in a strong liquidity position. It held R1.2-billion in cash and R2.3-billion in available bank facilities, despite having reduced its Euro debt by €36-million (R730-million) during the year.

Over R5-billion of borrowings was refinanced in the year, and R2-billion since year-end, at lower margins than previously achieved. The group managed to maintain its loan-to-value at 36.3% for the financial year.

Hyprop declared a final dividend of 299.3c apiece, equivalent to 75% of the distributable income from both portfolios, for full-year 2023 which is in line with the revised dividend policy.

Hyprop is rolling out further solar projects on its portfolio and has several programmes to reduce and recycle water, including further installations of eco-friendly toilets.

Through its zero-waste strategy, Hyprop says it plans to further optimise its waste diversion, while prioritising minimal waste.

In South Africa, annualised trading density grew by 11.8%, outperforming the yearly inflation rate of 5.4% in June.

Although loadshedding remained a challenge, seven of the group’s eight centres in the country have full backup power. Canal Walk is the exception given its historic participation in the City of Cape Town’s curtailment programme. Canal Walk will have full backup power by February 2024.

Some of the highlights in the portfolio were the opening of 11 new stores at Canal Walk and one more since year-end, including South Africa’s first UNIQ Clothing store. Somerset Mall strengthened its value proposition, welcoming Krispy Kreme and Xpresso Café, and began a redevelopment to accommodate a new Checkers FreshX store and Cinema Connect. At Clearwater Mall, the Piazza upgrade was completed, which is posited to have improved trading for the restaurants and food outlet tenants. Rosebank Mall performed strongly, with foot count 19.7% higher and vacancies down to 1.5% in June from 2.4% in June 2022.

Net property income from the South Africa portfolio rose to R1.45-billion, while property expenses increased by 11%, most of which were diesel and generator costs. Tenant arrears reduced to R47-million from R74-million.

Hyprop spent R236-million on capital projects during the year and a budget of R500-million has been approved for full-year 2024.

In sub-Saharan Africa, consumers and retailers are indicated to be under pressure.

OUTLOOK

Hyprop says it is pursuing six strategic initiatives, namely, implementing sustainable solutions to reduce the impact of loadshedding in South Africa, repositioning both portfolios to retain and grow market share, reviewing the portfolios yearly to evaluate recycling of assets and new growth opportunities, protecting value in the sub-Saharan Africa portfolio, pending an exit, and maintaining the robustness of the balance sheet. Hyprop will also develop non-tangible assets.

“We are optimistic that the peak of inflation and interest rates is approaching. However, our financial performance will be negatively impacted in the short term by higher interest costs as borrowings are refinanced and interest rate hedges mature and are replaced at the prevailing high interest rates,” Wilken says.

The group is forecasting a 10% to 15% decrease in distributable income a share in the year to June 2024 owing to higher interest costs, which is dependent on a number of assumptions, including that no major economic or corporate disruptions occur.