HILTON TARRANT: One of South Africa’s largest listed property companies, Hyprop, reporting results for the six months to December today. Distribution growth of 9.5% reported, taking distributions to 231c. Pieter Prinsloo is chief executive of Hyprop. Pieter, the big one, the Rosebank Mall redevelopment nearly R1bn that you’ve committed to that, that project has been underway for quite some while, is it still on track?
PIETER PRINSLOO: Yes, correct, the development is still on track for completion later this year, the final completion is due in September 2014. Yes, it was always a long project for us, I think it was a two-year project and I must say we’ll be happy when it’s all done.
HILTON TARRANT: Is part of the new mall open already?
PIETER PRINSLOO: We’ve got a section of it open at the moment but at the moment there’s also quite a lot of construction work ongoing, especially inside the mall, as we’re redoing certain parts of the existing mall. So it is currently quite disruptive but since last year we’ve opened 30 new stores already.
HILTON TARRANT: Quite a challenge for your tenants, as well as your shoppers and customers to trade through these disruptions, I say this as a relatively frequent visitor to that area and it is quite challenging.
PIETER PRINSLOO: Yes, at the moment it is quite difficult, we always knew this was going to happen and we’ve also adjusted our numbers downwards to cater for this process while we’re busy. But we had some anchor tenants that had existing leases in place and we had to keep them open and trading, and we had to give them access as well but I think it’s just a couple more months and then we should see a significant improvement coming through.
HILTON TARRANT: A couple of big changes in the six months, one of those the acquisition of the Somerset Mall, down in Somerset West, in exchange for Sycom units it meant that you got rid of that holding in Sycom and in exchange got a mall that is in a rather attractive part of the country and an attractive part of the Cape, a big opportunity in that area.
PIETER PRINSLOO: Yes, it’s quite a well-established mall, it’s got a good tenant base there as well but it does give us some opportunities there to improve in the tenant mix. There’s also a bit of refurbishment work we want to do there in the food court area where we want to redevelop part of that just to make it more attractive and at the moment there’s also a bit of vacancy there. But overall a very good acquisition for us, it’s a sizeable mall that is able to dominate it’s catchment area.
HILTON TARRANT: You mentioned tenant mix there, is that something that you’re focused on throughout the portfolio, given the maturity of many of your properties?
PIETER PRINSLOO: Yes, absolutely, it is a big part of our focus, we’ve got retailers, industries coming up doing better, others are scaling down because of change in technology and so on. So it is pretty much an ongoing focus that we are continuously looking at how to improve our tenant mix. We’ve also got some international tenants coming into South Africa and they do like to go first into those sizeable dominant malls, so they tend to see us quite early in the process as well.
HILTON TARRANT: Which of those international companies have you managed to attract thus far?
PIETER PRINSLOO: Well, last year through the extensions of some of the Edgars stores at our shopping centres they’ve been able to accommodate many of the international brands. In Canal walk we’ve got a Topshop, we’ve also accommodated some of the freestanding UK brands like Lipsy and Dune. We also at Hyde Park have a nice complement of international traders and we did a Mont Blanc store there. Then coming this year also to Canal Walk in Cape Town is a store called Forever 21, it’s an affordable fashion brand from the US, very popular there and also their price point entry into our market should be quite nice, it should be affordable fashion in the range of Cotton On group that’s from Australia and Mr Price locally. So it should be interesting to see the dynamics between those stores.
HILTON TARRANT: Pieter, how was trading over the Christmas period?
PIETER PRINSLOO: We did see some growth in comparison to the previous December but it was a bit subdued. A number of factors that did play a part were after December 15 on the day of the funeral it was quiet, we didn’t trade that day and especially the Gauteng centres after that date did slow down quite significantly over the holiday period. Also on a year on year comparison we had one Saturday less of trading this year compared to the previous year and, as you know, in December a Saturday is a big trading day for us. So all in all a bit more subdued numbers but we were still happy with the densities.
HILTON TARRANT: Across the portfolio you have managed to drive vacancies lower in this reporting period, is this as good as it gets considering the environment?
PIETER PRINSLOO: I think so yes, there’s still a bit of vacancies that we’ve got in some of our value centres and that has come down significantly but I think it gets more challenging going forward. We’ve also got a bit of vacancies in our office portfolio, even though it’s small for us the office market is still under pressure and I think generally our big regional malls continue to trade at vacancies of less than 1%.
HILTON TARRANT: You have rolled out WiFi for shoppers in Canal Walk, are you going to be extending that through the portfolio and is this a free service for your customers?
PIETER PRINSLOO: We had it totally free just for two months just to get it established. It was very well received in Canal Walk and we had many registered users on it. It is really high speed so it’s obviously a nice offering to our customers. We are going to roll it out to the rest of our portfolio but it won’t be totally free, I think you get half an hour free and thereafter you pay R10 for the next half an hour, so it is quite affordable. We’re not making money out of it and we’ve partnered there with a very good partner being M-Web and they’re doing all the infrastructure work for us.
HILTON TARRANT: Aside from South Africa one of the other big game changers in the six months you did acquire 87% of African Land Investments and this was a company that was actually due to come to the market and you snapped it up together with Atterbury before it was even able to list. What was so attractive about this company?
PIETER PRINSLOO: Ja, we were actually discussing it this morning, what was nice about that was it had one single asset in it and it’s a sizeable dominant centre in Lusaka. So from Hyprop’s point of view it’s a perfect fit for our portfolio and fortunately we had an opportunity, we had to react very quickly and together with Attacq we were able to secure the asset. As I say, the asset is over 40 000 sqm, which is large for a centre outside South Africa in the rest of Africa. It has got very strong anchors in the form of Shoprite and Game, it trades very well there. It’s got a nice tenant mix and it also provides us with some opportunities in the future where we’ve got about 49% of the leases up for renewal in the next three years, there could be potentially upside in the rental levels there.
HILTON TARRANT: And Ghana, this a very interesting market for you, you have an existing centre in Accra with another one to come and a very interesting entry into the West African market. I say this because I visited Accra a good couple of years ago and it’s one of those cities that’s almost overlooked in favour of this mad rush to Nigeria.
PIETER PRINSLOO: Yes, yes, I think you’re 100% right there but even though it is a sizeable market on its own, it’s a very well-established stable country and city. What helps us is to have bought into an existing centre there that gave us the basis to establish ourselves and understand the market without taking too much risk upfront. We’ve learnt a lot from that process and that’s also enabled us now to do further developments in and around the city as we now understand how the demographics work. Ja, there’s quite a lot of development activity from our side focused on Ghana.
HILTON TARRANT: Looking ahead, trading for the rest of this year?
PIETER PRINSLOO: I think it should hold up nicely, we’ve still got some projects internally we want to do in terms of refurbishments, expansions and tenant relocations. We still see a good demand from our retailers, especially national and international retailers, and that’s a big part of our focus in how we can unlock those opportunities.
HILTON TARRANT: Pieter Prinsloo, the chief executive of Hyprop.