Retail-focused REIT, Hyprop Investments’ trading performance has returned to pre-Covid-19 levels, and in some cases, even higher, driven by its repositioning strategy.
In the six months to December 2021, the company grew its distributable income by 21% to R501 million on a like-for-like basis, reflecting the reduction in pandemic-related discounts, lower expected credit losses on trade receivables, and savings in interest costs due to a reduction in its debt.
Distributable income per share for the period was 146.5 cents (2020: 160.6 cents), a result of the issuance of new shares following 85% shareholder support for its dividend reinvestment plan for the year ended June 2021 which raised R876 million in equity.
Having strengthened its balance sheet over the past two years, Hyprop’s consolidated loan-to-value ratio (LTV) reduced from a peak of 51.7% in June 2020 to 41.5% as at 31 December 2021, notwithstanding a decrease in the valuation of its South African portfolio over the same period. This was achieved through the recycling of non-core assets (Atterbury Value Mart and Delta City in Belgrade) and successful dividend reinvestment plans for the 2020 and 2021 financial years.
“There are signs that the global impact of Covid-19 is reducing, and that economies are re-opening after two years of Covid-19 restrictions. We are optimistic that trading conditions will return to pre-Covid levels, as is evident in the trading metrics of all our portfolios in the last six months,” said Morné Wilken, CEO of Hyprop.
Its South African portfolio reported an 51% improvement in foot count year-on-year and an 8.3% improvement in trading density. Retail vacancies were at 2.4% at 31 December 2021, which subsequently reduced to 1.4% as at 28 February 2022.
In Sub-Saharan Africa, foot count across its assets rose by 9.1% with an improvement of 6.7% in trading density. Retail vacancies were 11.6% in December 2021. Hyprop plans to exit this portfolio but it remains focused on value creation through active asset management until this happens.
While EU green certificate restrictions (proof of vaccination, negative antigen tests or proof of recovery from Covid-19) negatively impacted its Eastern European portfolio’s trading metrics, particularly food courts, overall foot count was up 12.8% year-on-year and trading density improved by 11.2%. Retail vacancies were at 0.3% in December.
Hyprop currently owns 60% of Hystead, with PDI Investment Holdings owning the remaining 40%. In February, the company announced it had concluded an agreement with Hystead to acquire four assets within the Hystead portfolio. These core assets are Skopje City Mall in North-Macedonia; City Center one East and City Center one West in Croatia; and the Mall of Sofia in Bulgaria. Hystead’s fifth property, Delta City Podgorica in Montenegro, is in the process of being sold and until the sale is complete, Hyprop will retain its existing €45 million interest in the asset, representing 60% of the value.
The Hystead transaction is in line with Hyprop’s strategy for its Eastern European portfolio of acquiring premium retail properties in their respective jurisdictions that have the potential for future growth through active asset management and development initiatives.
“The transaction is in line with our strategy to further diversify our exposure into Eastern Europe, mitigating the company’s risk to the weaker South African economy, simplify the group structure and also address some concerns previously raised by shareholders specifically the Hystead funding structure,” commented Wilken.
“The key priorities for the next six months will be implementing the Hystead liquidity event with the disposal of Delta City Podgorica and the acquisition of the remaining four centres by Hyprop; continue to strengthen our balance sheet; annual reviews of our portfolio to ensure we retain assets that fit our strategy, continued repositioning of our South African portfolio, reduction of operational cost and the implementation of ESG initiatives. We will also closely monitor the impact of the invasion of Ukraine on our EE portfolio,” he concluded.
