Mall val­ues still ris­ing

Finweek English Edition - - Companies & Markets - JOAN MULLER joanm@fin­

RE­TAIL-FO­CUSED ????? Hyprop’s an­nual re­port is a telling re­minder of just how im­por­tant tim­ing is in the real es­tate game. The ac­qui­si­tion of Cape Town mega-mall Canal Walk is a case in point.

When Hyprop’s as­set man­agers, Marc Wainer and Wolf Ces­man, bought the cen­tre from Ned­bank for R1,165bn in 2003, many be­lieved the deal-mak­ing duo had lost their mar­bles. At the time, about 12% of Canal Walk’s floor space was empty, in­ter­est rates had rock­eted, re­tail spending was in the dol­drums and the cen­tre’s lo­ca­tion at Cen­tury City on the north­ern out­skirts of Cape Town’s CBD wasn’t yet es­tab­lished.

But the deal turned out to be one of the big­gest prop­erty coups of the decade. Hyprop’s lat­est an­nual re­port shows that by end-2008, Canal Walk’s value had surged nearly four­fold to R4,21bn – that’s a cap­i­tal gain of more than R3bn within five years.

The mall, which is 80% owned by Hyprop, is to­day the fund’s big­gest sin­gle money-spinner, ac­count­ing for about 45% of the com­pany’s to­tal rev­enue of R658,6m in 2008.

With a to­tal floor space of 135 000sq m, Canal Walk is also SA’s big­gest shop­ping cen­tre, which was vis­ited by about 20,4m peo­ple in 2008. And an­other 15 500sq m of re­tail space is cur­rently un­der construction at the mall at a cost of R91m.

Chair­man Michael Aitken sug­gests in his over­view that the value surge of Canal Walk as well as that of Hyprop’s other malls – in­clud­ing Hyde Park, The Glen and the Rose­bank Mall in Jo­han­nes­burg and South­coast Mall in Shel­ley Beach – is a re­flec­tion of both scarcity value and con­tin­ued in­come growth.

De­spite the over­all slow­down in re­tail sales last year, Hyprop still man­aged to grow its in­come pay­outs (dis­tri­bu­tions) by a healthy 14,1% in 2008. The R7,1bn shop­ping cen­tre port­fo­lio recorded av­er­age rental growth of 14%, which Aitken at­tributes to “con­sis­tently high” oc­cu­pancy rates and on­go­ing de­mand for space de­spite a tough trad­ing en­vi­ron­ment.

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