Hyprop has published its results for the year ended June 2022, reporting an increase in its distributable income to R1.17 billion from R1.09 billion the year before, despite only including three months of the European portfolio’s income and the loss of income due to the sale of Atterbury Value Mart at the beginning of the financial year.
Its South African portfolio’s distributable income increased by 9% on a like-for-like basis with its European portfolio delivering R110 million of net operating income for the three months, ahead of the forecasted R98 million.
The Hystead ‘liquidity event’ became effective during the second half of the year and the transaction enabled Hyprop to take full control of the four remaining Eastern European shopping centres with effect from the end of March 2022.
The group’s fully consolidated loan-to-value (LTV) ratio decreased to 36.4% in June 2022 from a peak of 51.7% in June 2020, well below the 55% ratio set out in the covenants of its Domestic Medium-Term Note programme agreed with the banks.
“We are pleased about the good operational performance of all our centres. It is a good indication that our strategy is paying off. Unfortunately, the risk in the current economic environment remains elevated, with the rising inflation and energy cost and therefore we will remain cautious and conservative in our approach and strategy,” said Morné Wilken, Hyprop CEO.
South African portfolio
In the year to June 2022, its tenant turnover increased by 13.6% and it continued to rise by 14.9% in July 2022 and 15.6% in August 2022. All of Hyprop’s centres’ tenant turnover increased by double digits.
At period end, retail vacancies across the portfolio were 2% (June 2021: 2.4%) and by August 2022 it had fallen to 1.5%. The independent valuation of the South African portfolio at 30 June 2022 was R22.7 billion, a 2.6% increase compared to 30 June 2021. During the year, Hyprop spent R260 million on the repositioning strategies at its centres.
New tenants and modern new brands have been opened across the group’s centres including the first Zara, Ted Baker and UNION-DNM stores in the local portfolio in Canal Walk. Other standouts are improvements to the tenant mix at Rosebank Mall, the successful completion of the revamp of the food court at Clearwater Mall, and the completion of the reconfigured upper level at The Glen.
Eastern European portfolio
Total tenant turnover at Hyprop’s Eastern European centres rose 14.5% during 2022 and retail vacancies at end-June 2022 were 0.7%.
Some of the highlights in Eastern Europe include the completion of a large outdoor playground at Skopje City Mall and the addition of new, diversified offerings in the food court. City Center one East and City Center one West have welcomed new, fresh brands, including a Hoću knjigu bookstore, Xiaomi – Mi, selling electronics, various food offerings and well-known sneaker and streetwear retailer, SNIPES.
At The Mall in Sofia, the first phase of upgrading the bathrooms is expected to be completed by November 2022 and the second phase will begin in Q1 2023.
The Ukraine/Russia war has not directly affected its Eastern European properties, although the higher energy costs have eroded consumers’ spending power and increased tenant occupancy costs.
The independent valuation of the Eastern European portfolio by CBRE is €573 million at end-June, which is close to the €575 million valuation used for the transaction. €1.9 million was spent during the year on upgrades to and refurbishments of the Eastern Europe properties.
Sub-Saharan Africa (excluding SA) portfolio
Foot count across the centres in Ghana and Nigeria was 3.5% higher year-on-year at end-June, while retail vacancies have fallen to 10.1% (June 2021: 12.2%). Measured in local currencies, the centres are showing a gratifying improvement in key metrices, since the focus has been on improving the centres’ operating performance pending exit.
In Rands, Hyprop’s attributable share of earnings after tax (before the effect of property evaluations) rose by 22% year-on-year, driven largely by a 4% increase in revenue and lower bad debts. The average US dollar/rand exchange rate had only a marginal effect.
Highlights included the opening of a flagship Nike store at Ikeja City Mall in Lagos, a first of its kind in West Africa. New brands also opened at Accra Mall, West Hills Mall, and Kumasi City Mall.
In early September, Hyprop Mauritius and AIH International (the co-shareholder in AttAfrica) signed a term sheet on the sale of 100% of AttAfrica. This transaction is still subject to final negotiations and further details will be published in due course.
The year ahead
The REIT’s management has set six strategic priorities for the year ahead: repositioning the South African portfolio; retaining the dominance of the European portfolio; annually reviewing the portfolios to consider recycling assets and growth opportunities; extracting returns from the sub-Saharan portfolio pending exit; further developing non-tangible assets; and maintaining a healthy balance sheet.
“We will continue to focus on generating sustainable total returns for shareholders through optimal capital allocation based on risk-adjusted returns, whilst maintaining a healthy balance sheet,” Wilken concluded.