JSE specialist shopping centre REIT, Hyprop, has announced progress on its strategy communicated to the market in March this year, where it stated its intention to reduce its exposure to sub-Saharan Africa excluding South Africa to focus its attention and capital on its South African and Eastern European businesses. AttAfrica – in which Hyprop owns a 37.5% equity stake – has disposed of its interests in Achimota Retail Centre in Ghana for an undisclosed sum.
Hyprop CEO Morné Wilken said: “At interims in March 2019, we stated clearly our intention to curb Hyprop’s exposure to sub-Saharan Africa. Hyprop initiated, negotiated and concluded the transaction.” At December 2018 the group had reported an impairment in the SSA portfolio of R1.07 billion and cautioned of right-sizing of malls in the portfolio down the line. The sale of the asset was done at the December 2018 book value. Hyprop will use its share of the proceeds to reduce its USD debt.
Following the transaction, the SSA (sub-Saharan Africa) portfolio will comprise 7.5% of Hyprop’s global property portfolio, down from 8.3% previously. The remaining SSA investment comprises stakes in Accra Mall and West Hills Mall in Accra, Ghana; Kumasi City Mall in Kumasi, Ghana; Manda Hill Centre in Lusaka, Zambia; and Ikeja City Mall in Lagos, Nigeria. Hyprop and the shareholders of AttAfrica intend to further reduce the exposure to SSA over time. The sale of another shopping centre is expected in the near future, and Hyprop is dealing with several parties regarding the sale of the four other shopping centres.
Hyprop has provided c.70% of AttAfrica’s capital to date. A contraction of AttAfrica’s portfolio through the disposal of Achimota Retail Centre will reduce Hyprop’s US Dollar debt and impact positively on the group’s Loan to Value ratio, while at the same time enabling the group to focus on key regions of South Africa (“SA”) and Eastern Europe (“EE”). At December 2018, distributable income had grown by 8,8% in the SA portfolio and by 16.6% in the EE portfolio. Wilken highlights: “Despite tough times for retailers in South Africa, vacancies in our SA portfolio remain on a sustained decline and, at 1% of the portfolio, are well below the industry average, and the EE portfolio is almost fully-let”.
In addition, Hyprop today provided the market with a pre-close update in which Hyprop outlined its strategic focus areas. “In SA we aim to reposition malls, partner with tenants and apply a portfolio approach to dealing with tenants, while in EE we are looking at strengthening the entertainment and food offering and cementing the dominance of our centres by securing rights of extensions.”
In March 2019, Hyprop successfully refinanced/raised R4 billion in only three months. “From a debt perspective, we remain confident of our ability to continue refinancing loans and raising capital as necessary,” says Wilken. Looking ahead, Hyprop plans to reduce LTV and restore its long term investment grade rating, while the measures already implemented bode well for an improvement in Moody’s outlook.
Edcon accounts for 7.6% of Hyprop’s total gross income and 9.4% of Hyprop’s GLA. The group remains mindful of its exposure to Edcon and is working proactively to mitigate against this. “We have a proven track record of successfully re-tenanting major tenant spaces following the closure of the Stuttafords chain in 2017 and have already reduced our Edcon exposure by 8 630 m².”
Hyprop’s major domestic projects to reposition its malls include The Glen’s R121 million redeveloped food court as well as the restroom upgrade and a newly integrated cinema block and piazza at Woodlands which has seen footfall increase 25% since completion. Hyprop has also made significant progress in repositioning and right-sizing its anchor tenants at Woodlands to reclaim the dominance of the centre in the near future.
Other projects include the upgrade of the entertainment offering at the foodcourt at Canal Walk, as well as the restrooms, the downsizing of Edgars at the Glen and the opening of the Fresh-X Checkers store, in November 2019. The Checkers in a nearby centre will also close.
In the EE portfolio, Hyprop has invested €25 million to take advantage of the robust retail landscape, by completing the 12 000m² extension to The Mall of Sofia, Bulgaria. Launched in June, The Mall of Sofia’s two level extension will add 40 new stores, an increase from 182 to 222, making it the second largest shopping centre in Bulgaria at 62 000m².
Other investment projects include an 18-month project at the 36 264m² Skopje City Mall (Skopje, Northern Macedonia) entailing right-sizing of various tenants, introducing additional international retailers, upgrading restrooms, improving common areas and the foodcourt, introducing an outside play area & landscaping with improved terraces and adding a new escalator to improve foot fall circulation. The project has commenced and will be completed by March 2021.
Further projects in the portfolio include at Delta City Podgorica (23 280m²; Podgorica, Montenegro), where the parking deck is currently being upgraded and paid parking will be introduced. There are plans to expand the mall, subject to planning and council approval due to the huge demand from retailers to enter the Montenegrin market. At City Center one East in Zagreb, Croatia, a 14 000m² mall expansion is planned, to meet the tenant demand in the area.
Wilken concludes: “Our focus areas include continuing to improve trading densities, minimising the impact of reversions, and identifying new potential revenue streams in South Africa, while in Eastern Europe we will increase value through asset management initiatives and improved clarity on financial reporting.”