Johannesburg - While Hyprop Investments [JSE:HYP] reported on Tuesday it was struggling to find tenants for its new developments, the industry is astir on Redefine's intention to up its stake in the group.
Hyprop reported an increase in distribution of 6.5% per combined unit to 328c for the year to end-December 2009. Stripping out Stoneridge Mall which opened in September 2008, the company's distributions grew by 11%.
Stoneridge's vacancy rate stands at 24% and the Southern Sun Hyde Park Hotel, which opened in September 2009, had an occupancy rate of between 22% and 25% one month after opening.
"We're working with tenants [at Stoneridge] to get them to grow rentals to the point where we can achieve rental sustainability," said CEO Mike Rodel.
"When the hotel opened, the occupancy was way short of what we were looking for," he said, adding that the first sign of a positive uptake from corporates was in February 2010.
The retail-focused company owns super-shopping centres like The Mall in Rosebank, Hyde Park in Johannesburg and Canal Walk in Cape Town.
Nice fit or unattractive move?
According to Barnard Jacob Mellet's Mohamed Kalla, Hyprop historically shows a return of about 12% per year. "It's only slightly disappointing if you strip out Stoneridge and the hotel at Hyde Park."
Kalla, was however, disappointed by the company's expected growth of between 8% and 9.5%. "Ordinarily it sounds high, but considering that there will be big savings with regards to asset management fees it's disappointing."
On Monday, Redefine Property released a cautionary to shareholders that it aims to increase its 33.3% stake in Hyprop.
"It fits very nicely with Redefine's retail portfolio, which lacks big malls," said Old Mutual property analyst Evan Robins. "Big regional centres are regarded as the first prize for any property company."
However, Kalla called it "an unattractive move".
According to him, a transaction will have a hugely dilutionary effect on Redefine's income due to a big yield differential between the companies. "If the intention is to do a full merger, I can't see the benefit for Hyprop - it will be a trade-off between specialisation with diversification."
According to a Stock Exchange News Service (Sens) release by Hyprop on Tuesday, it had not been formally approached by Redefine.
Hyprop's distribution for the financial year ending December 31 will be 167c per combined unit.
- Fin24.com