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Audited results for the six months ended 30 June 2013
Hyprop Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1987/005284/06)
JSE share Code: HYP
ISIN Code: ZAE000003430
(Approved as a REIT by the JSE)
(“Hyprop” or “the company”)
AUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013
Total distribution 213 cents up 7,6%
Somerset Mall acquisition
Redevelopment of Rosebank Mall on track
First dividend from Atterbury Africa
Obtained REIT status from 1 July 2013
STATEMENT OF COMPREHENSIVE INCOME
Audited Unaudited Audited
30 June 2013 30 June 2012 31 December
R’000 R’000 2012
R’000
Revenue 1 099 489 1 053 122 2 177 625
Investment property income 1 008 671 988 772 2 016 184
Straight-line rental income accrual 15 879 (14 049) 9 208
Listed property securities income 74 939 78 399 152 233
Property expenses (347 277) (350 377) (714 284)
Net property income 752 212 702 745 1 463 341
Other operating expenses (27 729) (24 423) (53 885)
Operating income 724 483 678 322 1 409 456
Net interest (191 723) (210 986) (404 827)
Received 17 234 10 844 22 180
Paid (208 957) (221 830) (427 007)
Net operating income 532 760 467 336 1 004 629
Change in fair value 1 403 721 422 786 1 273 905
Investment property 1 198 105 437 275 1 137 924
Straight-line rental income accrual (15 879) 14 049 (9 208)
Listed property securities (2 842) 56 882 315 259
Derivative instruments 224 337 (85 420) (170 070)
Profit/(loss) on disposal 28 061 308 (15 221)
Investment property 90 (11 886)
Listed property securities 308 (3 335)
Sycom rights offer nil paid letters 27 971
Amortisation of debenture premium 49 119 238 002 487 925
Non-core income 1 009
Income before debenture interest 2 014 670 1 128 432 2 751 238
Debenture interest (517 831) (481 364) (994 333)
Net income before share of income from
associate 1 496 839 647 068 1 756 905
Share of income from associate 4 262 144
Profit before taxation 1 501 101 647 068 1 757 049
Taxation 2 239 008 (561 787) (753 169)
Profit for the period 3 740 109 85 281 1 003 880
Other comprehensive income
Exchange differences on translation of foreign
operations 319 (6)
Total comprehensive income for the period 3 740 428 85 281 1 003 874
Abridged reconciliation - headline earnings
and distributable earnings
Total profit for the period 3 740 109 85 281 1 003 880
Debenture interest 517 831 481 364 994 333
Earnings 4 257 940 566 645 1 998 213
Headline earnings adjustments (3 296 367) (593 960) (915 940)
Change in fair value of investment
property (net of deferred taxation) (1 198 105) (335 650) (443 236)
Deferred taxation – investment property (2 021 082)
(Profit)/loss on disposal of investment
property (90) 11 886
Profit on nil paid letters (27 971)
Amortisation of debenture premium (49 119) (238 002) (487 925)
(Profit)/loss on disposal of listed
property securities (308) 3 335
Headline earnings/(loss) 961 573 (27 315) 1 082 273
Distributable earnings adjustments (444 320) (508 700) (86 014)
Change in fair value of listed property
securities (net of deferred taxation) 2 842 (46 264) (259 238)
Change in fair value of derivative
instruments (224 337) 85 420 170 070
Taxation 1 520 1 443
Deferred taxation – listed property
securities and other (219 812) 469 544
Hyprop Investments (Mauritius) (2 355)
Investment in associate - Mantrablox (3 969)
Transaction costs – Attfund and Sycom 1 791 1 711
Distributable earnings 517 253 481 385 996 259
Total combined units in issue 243 113 169 243 113 169 243 113 169
Weighted average combined units in issue 243 113 169 243 113 169 243 113 169
Basic and diluted earnings per combined unit 1 751,4 233,1 821,9
Basic and diluted headline earnings/(loss) per
combined unit 395,5 (11,2) 445,2
Distributable earnings per combined unit 212,8 198,0 409,8
Distribution details
Total distribution for the year 213,0 198,0 409,0
Six months ended 31 December 211,0
Six months ended 30 June 213,0 198,0 198,0
STATEMENT OF FINANCIAL POSITION
Audited Unaudited Audited
30 June 2013 30 June 2012 31 December
R’000 R’000 2012
R’000
Assets
Non-current assets 20 282 124 19 996 275 20 996 662
Investment property 19 782 728 17 750 318 18 418 240
Building appurtenances and tenant
installations 63 065 44 548 55 356
Investment in associate 108 117 702 117 803
Goodwill 12 059 12 493 12 059
Long-term loans receivable 384 307 47 496 111 109
Listed property securities 2 023 718 2 282 095
Derivative instruments 39 857
Current assets 298 996 345 600 398 364
Receivables 224 215 210 277 183 056
Short-term loan receivable 47 434
Cash and cash equivalents 74 821 135 323 167 874
Non-current assets held-for-sale 2 400 822 290 337 131 074
Listed property securities 2 279 253 109 529
Investment in associate 121 569
Investment property 180 808 131 074
Total assets 22 981 942 20 632 212 21 526 100
Equity and liabilities
Share capital and reserves 10 814 409 6 155 388 7 073 981
Liabilities
Non-current liabilities 10 341 977 12 489 184 12 718 115
Debentures and debenture premium 5 822 497 6 121 539 5 871 616
Long-term loans 4 436 486 4 146 304 4 371 035
Derivative instruments 52 984 139 227 204 519
Deferred taxation 30 010 2 082 114 2 270 945
Current liabilities 1 825 556 1 987 640 1 734 004
Payables 359 725 367 397 373 090
Short-term loans 948 000 1 125 292 815 000
Derivative instruments 13 587 32 945
Combined unitholders for distribution 517 831 481 364 512 969
Total liabilities 12 167 533 14 476 824 14 452 119
Total equity and liabilities 22 981 942 20 632 212 21 526 100
Net asset value per combined unit(R) 68,43 50,50 53,25
Net asset value per combined unit – excluding
deferred taxation liability (R) 68,56 59,06 62,59
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Audited Unaudited Audited
30 June 2013 30 June 2012 31 December
R’000 R’000 2012
R’000
Balance at the beginning of period 7 073 981 6 070 107 6 070 107
Foreign currency translation reserve 319 (6)
Total comprehensive income for the year
3 740 109 85 281 1 003 880
Balance at end of period 10 814 409 6 155 388 7 073 981
ABRIDGED STATEMENT OF CASH FLOWS
Audited Unaudited Audited
30 June 2013 30 June 2012 31 December
R’000 R’000 2012
R’000
Cash flows from operating activities (49 773) 121 820 191 277
Cash generated from operations 660 705 666 195 1 478 600
Interest received 17 234 10 844 22 180
Interest paid (215 147) (221 830) (427 007)
Taxation paid 16 (324) (68 067)
Distribution to combined unitholders (512 969) (333 065) (814 429)
Income from associate 388
Cash flows from investing activities (241 730) 72 427 125 580
Cash flows from financing activities 198 450 (267 318) (352 879)
Net decrease in cash and cash equivalents (93 053) (73 071) (36 022)
Cash and cash equivalents transferred to
non-current assets held-for-sale (4 498)
Cash and cash equivalents at beginning of
period 167 874 208 394 208 394
Cash and cash equivalents at end of period 74 821 135 323 167 874
COMMENTARY
INTRODUCTION
Hyprop is South Africa’s third largest listed property fund (30 June 2013) and the largest
specialised shopping centre fund, with eleven directly owned shopping centres.
All rental income earned by the company, less property expenses and interest on debt, is
distributed to unitholders semi-annually. The company’s primary objective is to provide
sustainable income growth and capital appreciation to investors over the long term.
CONVERSION TO A REAL ESTATE INVESTMENT TRUST (“REIT”)
Following the introduction of REIT legislation in South Africa on 1 April 2013, Hyprop
changed its year-end to 30 June and converted to a REIT from 1 July 2013. In due course
Hyprop will implement a capital restructure to simplify its capital structure and ensure
compliance with legislation.
FINANCIAL RESULTS
Hyprop has declared a distribution for the six month period ended 30 June 2013 (“the period”)
of 213 cents per combined unit, an increase of 7,6% on the corresponding period in 2012.
SEGMENTAL OVERVIEW
30 June 2013 30 June 2012
Distributable Distributable
Revenue earnings Revenue earnings
Business segment R’000 R’000 R’000 R’000
Canal Walk 244 917 178 398 225 845 161 850
Super regional 244 917 178 398 225 845 161 850
Clearwater Mall 154 291 102 821 139 256 98 881
The Glen 99 038 63 602 92 566 59 847
Woodlands Boulevard 94 511 65 380 88 302 60 623
Cape Gate 94 695 59 298 89 348 57 408
Large regional 442 535 291 101 409 472 276 759
Hyde Park 83 504 53 686 78 168 48 400
Regional 83 504 53 686 78 168 48 400
Atterbury Value Mart 51 026 38 363 47 753 37 937
Willowbridge 40 028 22 644 37 850 21 752
Stoneridge 32 096 15 170 29 930 12 330
Somerset Value Mart 10 822 7 036 10 135 6 795
Value Centres 133 972 83 213 125 668 78 814
Shopping Centres 904 928 606 398 839 153 565 823
Stand-alone offices 53 424 34 034 55 826 36 351
Development property 1 44 745 19 953 53 191 29 072
Held-for-sale 2 (185) 35 125 6 325
Investment property 1 003 097 660 200 983 295 637 571
Listed property securities 3 74 939 74 939 78 399 78 399
Fund management expenses (26 213) (24 423)
Net interest (195 237) (210 986)
Atterbury Africa dividend 1 435
Word4Word Marketing 5 574 1 120 5 477 824
Straight-line rental income
accrual 15 879 (14 049)
Non-core income 1 009
Total 1 099 489 517 253 1 053 122 481 385
1 Rosebank Mall - transferred to development property from September 2012
2 Southcoast Mall and Southern Sun Hyde Park
3 Sycom (30 June 2013) – held-for-sale
Distributable earnings from shopping centres grew by 7,2% (excluding Rosebank Mall) with
strong performances from Canal Walk (10,2%) and Hyde Park (10,9%). Distributable earnings
from offices in the prior period included a rental guarantee, resulting in a reduction in
distributable earnings in the current period.
Planned vacancies at Rosebank Mall due to the redevelopment project had an estimated R16
million impact on distributable earnings. The dilution was in line with budget. The dilution
will continue for the next 12 months, while the centre remains under construction.
Income from listed property securities reduced due to the disposal of the investments in
Vunani and Acucap during 2012.
The reduction in net interest paid is primarily due to asset sales during 2012 of R524
million.
The property cost-to-income ratio improved to 34,4% (31 December 2012: 35,4%), while the
total cost-to-income ratio at a fund level improved to 34,6% (31 December 2012: 35,4%).
Total arrears at 30 June 2013, comprising normal arrears, legal cases and outstanding tenant
deposits, improved to R17,9 million (31 December 2012: R19,8 million) and the total allowance
for doubtful debts was R9,0 million (31 December 2012: R10,2 million).
Vacancies
Retail vacancies increased slightly compared to December 2012, mainly due to increased
vacancies at the value centres (Stoneridge and Willowbridge). Demand for retail at the
shopping malls continues to be strong with vacancies of less than 1%. Office vacancies
reduced from 9,1% to 8,1%.
Vacancy profile by sector* % of total GLA % of total GLA
30 June 2013 31 December 2012
Retail 2,1 1,7
Office 8,1 9,1
Total 2,7 2,5
*Excludes Rosebank Mall (under development)
PROPERTY PORTFOLIO
Value per
Value attributable rentable
to Hyprop area
Rentable 31 December 30 June
area 30 June 2013 2012 2013
Business segment (m2) R’000 R’000 (R/m2)
Canal Walk 153 531 5 627 200 5 200 000 45 815
Super regional 153 531 5 627 200 5 200 000 45 815
Clearwater 86 031 3 203 000 2 945 000 37 231
The Glen 74 348 1 854 094 1 751 130 33 182
Woodlands Boulevard 71 607 1 886 000 1 770 000 26 338
Cape Gate 97 346 1 602 000 1 509 000 16 457
Large regional 329 332 8 545 094 7 975 130 27 808
Hyde Park 37 003 1 556 000 1 420 000 42 051
Regional 37 003 1 556 000 1 420 000 42 051
Atterbury Value Mart 47 475 987 000 952 000 20 672
Willowbridge 44 663 585 000 620 000 13 098
Stoneridge 48 584 421 200 432 900 9 633
Somerset Value Mart 12 386 185 000 170 000 14 936
Value centres 153 378 2 178 200 2 174 900 14 507
Shopping centres 673 244 17 906 494 16 770 030 29 667
Stand-alone offices 52 206 749 000 710 000 14 347
Development property 1 35 950 1 187 000 990 000
Held-for-sale 2 130 000
Investment property 761 400 19 842 494 18 600 030
Listed property securities 3 2 279 253 2 282 095
Atterbury Africa 336 994 111 109
761 400 22 458 741 20 993 234
1 Rosebank Mall – transferred to development property from September 2012
2 Southern Sun Hyde Park
3 Sycom (30 June 2013) – held-for-sale
Investment property
Investment property was independently valued by Old Mutual Investment Group South Africa
using the discounted cash flow method. Investment property increased in value to R19,8
billion, after a fair value adjustment for the period of R1,2 billion.
The increase in valuation of the shopping centre portfolio was driven primarily by income
growth and reductions in discount rates and cap rates, supported by strong demand for quality
shopping centres.
Developments
Construction work on the Rosebank Mall redevelopment is progressing well with the completion
of the basement parking and the Bath Avenue entrance. The first newly built shops are set to
open in the last quarter of 2013. Final completion is scheduled for September 2014. The total
capital cost, including a further extension to the Bath Avenue bridge, is R932 million with
an anticipated yield of 7%. Lease commitments currently stand at 95% of the lettable area.
The store enlargements and relocations at Hyde Park have been substantially completed. The
2 700m² Edgars extension and the enlargement of the Foschini store at The Glen, and the
2 700m² Edgars extension at Canal Walk, are scheduled to begin trading in the second half of
2013. The total cost of these projects is R91 million (Hyprop share: R72,3 million) and are
expected to produce an average yield of 11%.
Disposal of investment in Sycom and acquisition of Somerset Mall
The acquisition of 100% of Somerset Mall from Sycom in exchange for 81,5 million Sycom units
remains subject to the transfer of a 50% undivided share in the mall from AECI pension fund
to Sycom. This is anticipated to occur in the next few months.
The transaction, valued at R2,3 billion, is based on an income for income swap with no
dilution in distributable earnings expected for Hyprop. As part of the transaction, Hyprop
will dispose of its remaining 2 725 688 Sycom units.
In May 2013 Hyprop disposed of its Sycom rights offer nil paid letters for R28 million.
Atterbury Africa
Hyprop received its first dividend (R1,4 million) from its 37,5% shareholding in Atterbury
Africa during the period.
Atterbury Africa, jointly controlled by Hyprop and the Atterbury Group, has made significant
progress in developing quality shopping centres in the rest of Africa, having secured
additional development projects in Accra, Ghana.
At 30 June 2013, R337 million (31 December 2012: R111,1 million) of Hyprop’s R750 million
initial commitment had been invested.
Overview of the Atterbury Africa property portfolio:
Property Rental area Ownership Attributable Comments
(m2) value US ‘000
Accra Mall (Accra, Existing centre, currently
Ghana) fully let, financial results
19 000 47% 35 250 ahead of budget
West Hills Mall Construction work on new
(Accra, Ghana) mall is progressing well and
is scheduled for opening in
26 500 45% 42 087 October 2014
Achimota Land (Accra, Acquisition of land rights
Ghana) concluded. Design finalised
- 75% 41 623 and pre-letting commenced
Waterfalls Project Land holding with
(Lusaka, Zambia) development rights for
- 25% 1 374 retail and a hotel
NET ASSET VALUE
The net asset value per combined unit (“NAV”) at 30 June 2013 was R68,43, representing a
28,5% increase on the NAV of R53,25 at 31 December 2012. The substantial increase in NAV per
combined unit was as a result of the elimination of deferred capital gains taxation (together
with the fair value adjustment to investment property), following the conversion to a REIT on
1 July 2013. See further detail in this regard under basis of preparation below.
Excluding deferred taxation, the NAV at year-end was R68,56 (31 December 2012: R62,59), a
9,5% increase on the prior year, primarily due to an increase in the independent valuation of
the investment property portfolio. The closing combined unit price of R78 on 30 June 2013
represents a 13,8% premium to the year-end NAV, excluding deferred taxation.
BORROWINGS
Net borrowings at 30 June 2013 of R5,1 billion (31 December 2012: R4,9 billion) equate to a
gearing ratio of 22,9%, down from 23,1% in 2012. The ratio reduced mainly due to the increase
in valuation of the property portfolio.
At year-end, interest rates were hedged in respect of 87% (31 December 2012: 82%) of
borrowings, at a weighted average rate of 8,1% (31 December 2012: 8,4%).
Hyprop increased its debt capital market (“DCM”) issuance in April 2013, with the conversion
of R648 million of existing bank debt to DCM funding. This brings total DCM issuance to R1,6
billion, or 31% of total borrowings.
DIRECTORATE
Independent non-executive chairman Mike Aitken retired, and non-executive directors Marc
Wainer and Jabu Mabusa resigned from the board on 27 June 2013.
Gavin Tipper replaced Mike Aitken as independent non-executive chairman on the same date.
Les Weil, an independent non-executive director and chairman of the audit committee, passed
away on 28 June. Lindie Engelbrecht, an independent non-executive director and incumbent
audit committee member, replaces Les as chairman of the audit committee.
On 28 August 2013, Thabo Mokgatla was appointed to the board of Hyprop as an independent non-
executive director. Thabo has also been appointed to the audit committee. He is a Chartered
Accountant (SA) and is a director on the boards of a number of listed companies.
PROSPECTS
Hyprop’s large, quality assets with strong contractual escalations and operational
efficiencies are defensive qualities for a property portfolio in a difficult South African
economy. Hyprop will continue to focus on growing its assets with acquisitions of dominant
shopping centres, as with Somerset Mall, while looking for yield enhancing expansions of
existing centres and further shopping centre developments in the rest of Africa.
Taking into account the short-term dilution due to the Rosebank Mall redevelopment, Hyprop
expects to show distribution growth of between 6,5% and 8,5% for the year ending 30 June
2014.
The growth in distributions is based on the following key assumptions:
- forecast investment property income is based on contractual rental escalations and
market related renewals; and
- appropriate allowances for vacancies have been incorporated into the forecast.
The forecast has not been reviewed or reported on by the company’s auditors.
PAYMENT OF DEBENTURE INTEREST
Distribution 52 of 213 cents per combined unit for the six months ended 30 June 2013 will be
paid to combined unitholders as follows:
September 2013
Last day to trace cum distribution Thursday, 19
Combined units trade ex distribution Friday, 20
Record date Friday, 27
Payment date Monday, 30
Unitholders may not dematerialise or rematerialise their combined units between Friday, 20
September 2013 and Friday, 27 September 2013, both days inclusive.
BASIS OF PREPARATION
These results have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), International Accounting Standard IAS34 ‘Interim Financial Reporting’,
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Standards Council, the JSE
Limited Listings Requirements and the South African Companies Act, 2008.
The accounting policies applied in the preparation of these results are consistent with those
applied in the audited financial statements for the prior financial year, except for the
adoption of IFRS 10 Consolidated Annual Financial Statements, IFRS 11 Joint Arrangements,
IFRS 12 Disclosures of Interests in Other Entities, IFRS 13 Fair Value Measurements and IAS
28 (Revised) Investments in Associates and Joint Ventures.
The adoption of these standards did not have a material impact on the group annual financial
statements.
South African REITs are not subject to capital gains taxation on the disposal of investment
property and on the disposal of listed property securities that are constituted as REITs.
Accordingly, at 30 June 2013, Hyprop eliminated accumulated deferred capital gains taxation
applicable to the investment property portfolio and the investment in Sycom. The deferred
capital gains taxation was eliminated through the statement of comprehensive income, and
resulted in a material increase in earnings, headline earnings and net asset value per
combined unit.
Grant Thornton has audited the group annual financial statements. The auditor’s report does
not necessarily cover all of the information included in this announcement. Unitholders are
therefore advised to obtain a copy of the auditor’s unqualified audit report together with
the financial information from the registered office of the company.
Preparation of the financial information was supervised by Laurence Cohen CA(SA) in his
capacity as Financial Director.
On behalf of the board
GR Tipper
Chairman
PG Prinsloo
CEO
28 August 2013
DIRECTORS:
GR Tipper*† (Chairman); PG Prinsloo (CEO); LR Cohen (FD); EG Dube*†; KM Ellerine*; L
Engelbrecht*†; MJ Lewin*;L Norval*; S Shaw-Taylor*; LLS van der Watt*†;
(* Non-executive † Independent)
REGISTERED OFFICE:
2nd Floor, Cradock Heights,
21 Cradock Avenue, Rosebank
(PO Box 52509, Saxonwold, 2132)
TRANSFER SECRETARIES
Computershare Investor Services
Proprietary Limited,
Ground Floor 70,
Marshall Street, Johannesburg
(PO Box 61051, Marshalltown, 2107)
COMPANY SECRETARY
Probity Business Services
Proprietary Limited
SPONSOR
Java Capital
INVESTOR RELATIONS
Envisage Investor & Corporate Relations
Date: 29/08/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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