Opposite ends of retail spectrum

Posted On Tuesday, 12 October 2010 02:00 Published by eProp Commercial Property News
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Owning shares in Hyprop Investments and Resilient Property Income Fund, means investors own some of the best retail property in SA.

Keillen NdlovuOwning shares in two of SA’s best rated and performing funds, Hyprop Investments and Resilient Property Income Fund, means investors own some of the best retail property in SA, in locations ranging from major cities to smaller mining towns.

Both Hyprop and Resilient are retail-focused property funds and have similar market capitalisations, with Hyprop at R8,8bn and Resilient at R8,1bn.

Hyprop has shopping centres in major metropolitan areas — mainly Johannesburg and Cape Town — and owns larger regional and super-regional centres.

Resilient Property Income Fund targets smaller cities, larger towns, including rural areas, and generally owns smaller centres.

Stanlib property analyst Keillen Ndlovu says investing in Resilient gives investors potential for higher income growth as management continues to explore growth areas and is more proactive in sweating the assets.

“You get some exposure to newer centres, lower-income — some supported by social grants — and nonmetropolitan areas and exposure to some places that investors might never visit or have probably never heard of (like Kathu in the Northern Cape). No other listed company has such huge exposure to Limpopo and Mpumalanga as Resilient.”

He says that in Hyprop an investor gets “steady growth from mature assets in the metropolitan areas and exposure to some of SA’s flagship shopping centres, like Canal Walk”. Hyprop’s income also comes from hotels like The Grace and Southern Sun Hyde Park.

Leon Allison, research analyst at Macquarie First South Securities, says: “If you own both these stocks, you own some of the best retail in SA across the board.”

Meago property analyst Jay Padayatchi says it is interesting that Resilient and Hyprop’s strategies are similar, yet differ markedly in terms of their final offerings.

Mr Padayatchi says Resilient’s strategy is to own dominant shopping centres in previously underserviced, high-growth nodes in nonmetropolitan areas generally servicing a lower overall living standard measure (LSM).

“Resilient’s retail offering in these areas usually becomes so dominant that there is often a clamour by the major retailers to have a presence in these centres,” Mr Padayatchi says.

Hyprop’s strategy has always been to focus on the higher LSM as well as the aspirant shopper in the more traditional urban nodes.

“Hyprop’s offering has always been of outstanding quality, with shopping centres like Canal Walk, The Mall of Rosebank and Hyde Park Shopping Centre, amongst others,” he says.

Mr Ndlovu says Resilient has a “no mercy”, aggressive, entrepreneurial and competitive approach to its portfolio.

“Management is results-driven and Resilient has been a perennial outperformer, in terms of both capital growth and distribution growth,” he says.

“This can be attributed to management’s foresight — ie, seeing that most opportunities lay in the nonmetropolitan areas and in the lower LSM market.

“This is where the growth is and where the population is.

“Resilient is allergic to boutiques — it prefers to have as many national tenants as possible.”

Mr Padayatchi says Resilient CEO Des de Beer comes from a banking background, “yet interestingly enough is one of the most hands-on property practitioners in this space”.

“He has an intimate knowledge of his portfolio, having built and refined it since listing Resilient in 2002. He has an impressive work ethic and is never afraid to get his hands dirty — which appears to have filtered down to his staff, including his shopping centre management teams, thereby producing sterling income growth since inception.”

Mr Padayatchi says Hyprop CEO Mike Rodel has been in the property industry for more than 20 years. Although he has been in the position of CEO at Hyprop for a short time, having been appointed last year, he appears to have a hands-on approach as well.

“Mike appears to have handled his baptism of fire with aplomb, steering Hyprop through the recession while dealing with Redefine’s attempts to take over the company,” Mr Padayatchi says.

“This saga may not yet be over as Redefine has increased its stake in Hyprop and Mike may yet still have his toughest task ahead of him,” Mr Padayatchi says.

Last modified on Monday, 21 April 2014 09:33

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