Tag: rental

By Londiwe Buthelezi for News24

Hyprop Investments says it had a negative reversion rate of 22.7% in the six months to 31 December 2020, reducing its monthly rental income by approximately R5 million.

The company’s retail vacancies increased to 3% while office vacancies stood at 16.2% at the end of December 2020.

Hyprop’s retail vacancies are lower than some of its peers, but its offices are much more empty.

The owner of Canal Walk and Rosebank Mall, Hyprop Investments, says it is receiving R5 million less in monthly rental income for leases that expired recently. This as vacancies rise, putting pressure on landlords to accept lesser rental rates than they did before Covid-19.

The property group – which also owns few office buildings, including those that are part of Hyde Park and Canal Walk shopping malls – said during the announcement of its financial results on Monday that it recorded an average negative reversion rate of 22.7% in the six months to 31 December 2020.

A reversion rate measures the extent to which landlords were able to increase rental rates for expiring leases that were renewed. A negative reversion rate shows lower rental rates than before.

In the six months to December, Hyprop renewed and signed new leases for 11.2% of its gross leasable retail space, or just shy of 75 000 square metres, and this is where the negative reversions were recorded.

“This equates to a reduction in monthly rental income of circa R5 million (equivalent to 2.4% of the average monthly rental). There has also been a noticeable increase in the number of tenants who are reluctant to commit to longer-term leases until economic conditions improve,” wrote Hyprop in the results announcement.

The company also noted that new leases were shorter by 4.1 years on average while those tenants who were renewing also shortened their lease terms by an average of 3.2 years. These tenants will also be paying lower rent in the future than what Hyprop is used to as the annual escalations decreased to 6.5% from 7.2% in the period ended in December 2019.

Hyprop, however, fared better than some of its peers when it comes to having empty malls. The company said vacancies in its SA retail portfolio increased to 3% in December 2020 from 2.4% in June. In comparison, Liberty2Degrees reported a vacancy rate of 4.7% in its retail portfolio at the end of December 2020 while Emira Property Fund’s retail vacancy rate stood 3.4%.

However, the same cannot be said for Hyprop’s office vacancies, which stood at 16.2% at the end of December – notably higher than the national average of 13.3% for the fourth quarter of 2020 that was reported by the South Africa Property Owners’ Association.

Hyprop’s office vacancies were also higher than those of all the other peers that recently reported their numbers, including Redefine (14.7%), Emira (14.9%), and Liberty Two Degrees (12.4%).

By Lauren Feiner for CNBC

WeWork announced Wednesday it is creating a fund with $2.9-billion of total equity capital to buy stakes in buildings it rents from.

The company has previously been criticized for CEO Adam Neumann’s stake in buildings he rented to the company.
The fund, called ARK, will serve as WeWork’s “global real estate acquisition and management platform,” according to a press release.

WeWork has become a business with a multi-billion valuation by being a prolific tenant. Now, it is starting a nearly $3 billion fund to become a landlord, too.

WeWork, which recently renamed itself to The We Company, is creating ARK, a “global real estate acquisition and management platform,” to buy stakes in buildings in which it plans to lease a lot of space, the company announced Wednesday. It will begin with $2.9 billion of total equity capital.

“ARK will focus on acquiring, developing, and managing real estate assets in global gateway cities and high-growth secondary markets that will benefit from WeWork’s occupancy,” according to the release. It will use WeWork’s own technology and relationships to access real estate opportunities and will “immediately stabilise assets by executing a proven pre-packaged business plan and will apply The We Company’s holistic solutions for real estate owners, based on The We Company’s established capabilities in sourcing, building, filling, and operating properties.”

The fund could further complicate questions about WeWork’s allegiances, which were illuminated by a Wall Street Journal report in January that revealed CEO Adam Neumann has profited by leasing buildings he owns to WeWork. Under the new plan, Neumann will actually transfer some of his real estate holdings into the ARK fund, Bloomberg Businessweek reported.

While this may provide better optics for the company, since ARK will be run independently from WeWork’s main business, ARK will still be under The We Company’s umbrella, according to Businessweek. A WeWork spokesperson declined to confirm or comment on the transfer of Neumann’s real estate holdings to CNBC.

But ARK also may provide a level of stability for WeWork and its investors, which is a key step as it prepares for a public offering. WeWork, like other recent tech IPOs, is still unprofitable. The company said it had a net loss of $1.9 billion on $1.8 billion in revenue in 2018, and a net loss of $933 million on $886 million in revenue in 2017, according to a presentation shared with CNBC in March. Lyft and Uber, which both recently debuted with losses, have fallen short of expectations in their brief tenures on the public market so far due to concern about their ability to close their margins in the future.

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