JSE-listed real estate investment trust Hyprop Investment has assured stakeholders that it has sufficient liquidity to recover from the lower tenant and footfall numbers experienced in April and May during South Africa’s strictest lockdown period.

On May 31, Hyprop had R1-billion of cash in South Africa, while it has also secured a R500-million revolving credit facility from a local bank.

The company also raised R100-million through the private placement of a bond under its debt capital market programme.

Hyprop does, however, have a bond of R425-million that matures in July, which it will settle from its cash resources.

Further, two dollar-denominated loans – valued at $45-million maturing in August, and $52-million maturing in October – in Mauritius will be refinanced through two new rand-denominated loans with the same lender.

This will significantly reduce the company’s dollar denominated borrowings and associated currency risk.

Hyprop’s independent property valuers have indicated that the impact of Covid-19 on the South African portfolio will be treated as a one-off valuation adjustment and not as a permanent devaluation.

Hyprop has withdrawn its distribution guidance for the year ending June 30 and delayed the distribution of its interim dividend for the six months ended December 31, 2019, to October this year.

The company plans to release its results for the financial year during the last week of September.

Moreover, Hyprop explains that the impact of the lockdown on the retail sector and the resultant trading restrictions in South Africa were severe. 

With the easing of the lockdown to Level 4 from May 1, more categories of stores were permitted to trade, on top of the essential services that were allowed to trade during Level 5, which was effective from March 26.

Under Level 3, effective June 1, all tenants have been able to trade, except cinemas, entertainment and personal care tenants.

The company advises that its retail vacancy as at April 30 was 2% and the total average monthly footcounts at its malls for March through to June were down 24%, 71%, 39% and 24% year-on-year, respectively.

The percentage of tenants trading in the first week of June at Hyprop’s malls in South Africa ranged from 67% to 97% across nine malls, with the majority of malls having more than 85% of their tenants trading.

Hyprop is negotiating rental relief packages with 86 of its national and larger retailer groups. About 37% of its negotiations of this nature are complete, while 63% are ongoing.

The company says it is focusing on tenant retention and these negotiations help with improved rental collections. Hyprop managed to collect 43.6% of monthly billings in April and 54.6% of monthly billings in May.

Meanwhile, Hyprop’s exposure to embattled Edcon has reduced from 50 199 m² to 47 762 m² owing to Edcon's sale of stationary company CNA after Hyprop’s interim financial period.

The company says that the reduced exposure equates to 6.7% of Hyprop’s South African gross leasable area (GLA). Of the total current Edcon exposure by GLA, only 976 m² has been identified by the business rescue practitioners of Edcon as onerous and 1 360 m² has been identified as nonviable space.

“We have leasing strategies in place for this space as well as for any additional vacancies resulting from the business rescue process. The vacancies will create an opportunity for Hyprop to introduce other uses and/or new retailers into our malls, and accelerate the repositioning of the portfolio.”

EUROPEAN & AFRICAN PORTFOLIO

All of Hyprop’s six malls in Montenegro, Macedonia, Serbia, Croatia and Bulgaria reopened in the first half of May, after about six weeks of lockdown in Eastern Europe.

Most tenants are trading as usual, except cinemas and restaurants in some of the regions.

For this portfolio, Hyprop managed to negotiate a high rate of rental relief with tenants in the region, where, in most cases, tenants will pay turnover-based rent and service charges for up to three months after reopening of the malls.

Thereafter, normal lease terms will apply. As compensation for these concessions, Hyprop has extended the tenants' lease periods.

Hyprop advises that more than 90% of the total European GLA is currently trading.

Meanwhile, Ghana’s lockdown was lifted on April 21, with all of Hyprop’s centres in the country being operational and with an average 90% of tenants trading.

The Nigerian lockdown was lifted on May 4, with 83% of Hyprop’s tenants in this country operating.

“A number of our tenants are reviewing their business models in light of the Covid-19 pandemic and we are working closely with them to design a collective offering that appeals to shoppers who frequent our malls.

“These initiatives are expected to improve trading densities. Our malls play in important part in their communities, and we believe they will continue to do so, beyond currently circumstances,” Hyprop states.