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Store closures to squeeze Hyprop

21 Jun 2017

Hyprop Investments, the blue chip R30bn specialist shopping centre owner is facing pressure following the tenant failure of department store chain Stuttafords at three of its malls and the possible closure of some of Edcon's retail outlets.

Its share price slipped 2.2% last Thursday, 15 June, amid concerns that tenant failures would affect its distribution payouts in its 2018 financial year. The share price fell further on Monday, falling 1.51% to close at R117.70.

The company has been the darling of fund managers for many years, with its share price having nearly doubled over the past five years.

Hyprop CEO Pieter Prinsloo said last week he expected it to take six months to find new tenants for the 11,000m² of space left empty after the closure of Stuttafords stores in three of its shopping centres.

The closures would affect dividend payouts to shareholders for the financial year to June 2018 negatively, the extent of which was yet be determined.

Fayyaz Mottiar, head of listed property at Absa Asset Management, said various international brands were exiting Hyprop's malls, placing pressure on the group to fill new vacant space but this was not unique to the owner of centres such as Hyde Park Corner, The Mall of Rosebank and Canal Walk.

"Retail property used to be seen as the most defensive property type, but this has changed. All major mall owners are facing pressure. Mango and Nine West closed stores and River Island is also leaving the country. This has left big holes at SA's superregional centres."

The Edcon group, which is the largest occupier of retail space in SA could also close some of its CNA, Edgars, Jet, Jet Mart and other stores within the next year.

But Mottiar still held Hyprop shares for his clients and expected the company to realise competitive distribution growth in its 2018 financial year.

"They're not going to do the 12% to 15% growth that they have in the past and are more likely to do high single-digit numbers, which would still measure up well against other South African Reits [real estate investment trusts]," he said.

Meago Asset Management director Thabo Ramushu said Hyprop had outperformed the market in 2017 and was on track to meet its 2017 financial year guidance.

Hyprop reported in March that it had grown its dividend 16.6% in the six months to December 2016 compared with the six months to December a year before. It also reported then it expected to realise dividend growth of 10% to about 12% for the full year to June 2017.

"Some foreign retailers are experiencing format and entry merchandising problems prompting them to scale back on expansion plans. Zara in particular is re-evaluating the space options in SA. Stuttafords closures and some Edcon standalone brands like River Island will put pressure on earnings."

Source: Business Day

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