NOTES TO THE FINANCIAL STATEMENTS — NOTE 35

35. Capital management
 

Hypropís capital consists of equity and long-term debt in the form of bank debt and debt capital market funding. The companyís capital management objective is to maintain a strong capital base to provide sustainable returns to shareholders over the long term. The companyís borrowings are limited by its Memorandum of Incorporation and the JSE Listings Requirements to 60% (2016: 60%) of the directorsí bona fide valuation of the consolidated property portfolio.

Hyprop’s (theoretical) unutilised borrowing capacity can be summarised as follows(1):

  June 2017
R000
  June 2016
R000
 
Value of property portfolio(1)(2) 33 249 951   33 368 587  
60% thereof 19 949 971   20 021 152  
Total gross borrowings (long term and short term)(3) 8 900 638   9 926 088  
Unutilised borrowing capacity(4) 11 049 332   10 095 064  
(1) Excludes investments in South-Eastern Europe
(2) Refer to Segmental analysis
(3) Excludes Euro debt
(4) In practice the board would not be comfortable to allow gearing levels to increase to 60% or even close to 60% (in the absence of a specific transaction). The long-term preferred gearing level is approximately 35%

At year-end, long-term borrowings may become payable in accordance with the terms of the loan arrangements. The company’s policy is to refinance the capital portion of the borrowings (in line with its capital objective above), while servicing interest.

The group is subject to various capital covenants imposed by lenders, which are managed as part of the overall funding and capital management process. The company has complied with all capital covenants specified in the debt agreements.


NOTES TO THE FINANCIAL STATEMENTS — NOTE 35