JSE-listed real estate investment trust Hyprop Investments says it has made good progress in executing its strategy for the year ended June 30.
It has moved ahead on all its priorities, including strengthening the balance sheet, advancing the implementation of its non-tangible strategy with the successful opening of the SOKO District at Rosebank Mall and repositioning its South African portfolio by rolling out its “Golden Thread”.
SOKO is the world’s first platform that enables digital-first retailers to access flexible physical space, book that space and sign a lease for that space in under ten minutes online.
The Golden Thread entails the further repositioning of the South African shopping centres around three key pillars – place, brand and people. Hyprop is evolving from a traditional mall structure to an omni-channel environment that offers customers personalisation and experience-led spaces.
The group’s distributable income for the year was R1.04-billion, equivalent to 336.5c a share, following a 21% increase in the number of shares in issue as a result of the 2020 dividend reinvestment plan (DRIP) and an accelerated bookbuild in April.
The results were also impacted by negative reversions, and the effect of rental discounts granted to struggling tenants and R119-million less income received from its subsidiary in Eastern Europe, Hystead, which reduced the group’s distributable income by R278-million, or 90c apiece.
A dividend of 336.5c was declared and shareholders will have the option of reinvesting the net cash dividend in return for additional Hyprop shares through a DRIP.
During the year, the group repaid more than R1-billion of debt, taking total debt repayments for the past two years to over R2-billion.
The loan-to-value (LTV) ratio at year-end of 37.2% was well below the LTV covenant of 50%. The R1.1-billion in proceeds received from the sale of Atterbury Value Mart, which was completed just after year-end, will further reduce the LTV to 34.9%.
The interest cover ratio was constant at 3 times, aided by a decrease in the net interest costs from R548-million to R522-million.
Hystead has accepted an offer to sell Delta City, in Belgrade, Serbia, for €115-million, with the proceeds to be used to reduce Hystead’s euro equity debt.
Trading metrics for the South African portfolio are still below pre-Covid levels. Average monthly footfall was 7.6% lower than in 2020, tenant turnover rose 3% and trading density was down 2.5%. Total retail vacancies remained stable at 2.4%.
Some of the significant new lettings in 2021 included Checkers FreshX stores in Rosebank Mall and Woodlands and Starbucks stores in Canal Walk, Somerset Mall and Woodlands.
New leases were concluded with the buyers of the former Edcon brands and exposure to CNA has been reduced from five stores to one through re-lettings.
Hystead’s assets, meanwhile, have taken longer to recover from the pandemic than the South African centres because of lockdowns, to varying degrees, between November 2020 and May.
Most Eastern European centres resumed normal trading from late April, but some restrictions remain. Average monthly footfall was 15.6% lower than in 2020 and trading density was down 7.6%. However, spend per head was 12.9% higher.
Retail vacancies were 0.3%, underscoring the dominance of these centres in their markets. During the quieter trading conditions, some of the facility upgrade projects were completed.
Trading conditions in Nigeria and Ghana remained challenging, reflecting economic conditions in the region; however, Ikeja Mall remains fully let and produced a good result, while the trading performance of the Ghanaian malls improved.
Total vacancies in sub-Saharan Africa were 12.1%, while net property income rose by 31%. Hyprop continues to pursue an exit from its sub-Saharan investments.
Hyprop CEO Morné Wilken says the group’s strategy and key priorities remain relevant, even in the event of a prolonged Covid-19 environment.
Key focus areas for the year ahead include completing negotiations on the agreement with PDI Investment Holdings to take control of the Hystead portfolio, strengthening the balance sheet, repositioning the South African portfolio for future growth, increasing the dominance of the Eastern European properties, extracting value from Africa while pursuing the exit strategy and growing the non-tangible asset base.
“Covid-19 remains a risk, as does the underperforming local economy. Consumer spending is expected to remain under pressure and consumer behaviour will continue to evolve.
“While we anticipate further negative rent reversions in South Africa in the short term, our repositioning strategies and strong balance sheet position will enable Hyprop to successfully navigate these challenges and reset the base for growth in the long term,” Wilken says.