Impact of Covid-19 still felt but Hyprop makes very good progress implementing revised strategy

Hyprop, the retail-focused REIT with a R45.4 billion portfolio of shopping centres in South Africa, Eastern Europe and sub-Saharan Africa, improved its distributable income by 18% in the six months to 31 December 2020 compared with the six months to 30 June 2020.

Distributable income was R473 million for the period, after the direct impact of Covid-19 which was R244 million across the total portfolio. Hyprop extended a lower level of Covid-19 related discounts to tenants in the second half of calendar 2020 than in the first half, with R104 million of rental discounts on the South African portfolio granted in the second half of calendar 2020.

“Trading conditions continued to be difficult, especially in December 2020, as lockdown restrictions affected trading hours, seating capacity and the psyche of many shoppers. As a Group we focus on the things we can influence and we are making good progress implementing our strategy,” says CEO Morné Wilken.

“The support we provided for our tenants has strengthened our partnerships with them and other service providers, helped us to manage vacancy levels, retain key tenants and ensure that our malls continue to be functional and serve their communities.

“Hyprop remains committed to creating safe environments and opportunities for people to connect and have authentic and meaningful experiences. While Covid-19 has changed our operating environment, we have ensured that our strategies and key priorities remain relevant.”

Hyprop reduced interest-bearing debt by R942 million in the last six months, settled all its dollar equity debt, and strengthened its balance sheet even further by retaining R777 million from its distributions for the 2020 financial year. The loan to value (LTV) ratio has reduced from 41.4% as at 30 June 2020 to 38.8% and ICR remains healthy at 2.6 times.

At the end of December, Hyprop had R528 million of cash on balance sheet and undrawn facilities of R1,15 billion.

Regional overview

South Africa

In South Africa (SA), vacancies in the retail portfolio increased to 3%, which is still well below the average of its peers in the market. Rental increases remain under pressure and tenants are showing a reluctance to commit to long-term leases until conditions improve. This may however be beneficial in the long run as the impact of Covid-19 dissipates, and the benefits of repositioning the SA portfolio accrue to justify higher rentals on future renewals.

We have completed phase one of installing free, high-speed Wi-Fi at all our South African malls and will shortly begin phase 2.

New lettings included the opening of a Checkers FreshX in Rosebank Mall in December 2020. The old Game premises at Woodlands Boulevard is being replaced by a Checkers FreshX store and a Stax. We have also agreed terms with Checkers to upgrade their store at CapeGate to the Checkers FreshX specification. There is heightened interest in Hyde Park Mall, where we have, among other new tenants, secured Tshepo Jeans, a fast-growing brand with a large social media following that marks the emergence of new, entrepreneurial retailers. KOL, a new restaurant and co-working space established by the founders of Willoughby’s, will open at Hyde Park Corner in March 2021.

Emphasising the importance of relevance and sustainability of Hyprop centres as key, Wilken comments: “We are currently piloting several initiatives to improve foot count, one of which includes the Pargo collection points at Canal Walk and The Glen. It is encouraging to see that collections at these points are steadily increasing. A number of these collections are for products not sold in our malls, meaning that we are broadening our customers’ choices without increasing lettable area. Parkupp is a parking app that gives users the ability to secure parking on a flexible basis and is being tested at Canal Walk and Rosebank Mall.

“The first SOKO district pilot at Rosebank Mall is on schedule to open in June 2021. SOKO means “market”, and the SOKO District will be a marketplace where retailers can rent space and reusable shop fittings via a flexible digital leasing platform, without the significant financial commitments that exist in the traditional retail environment. The leasing platform is powered by data driven shopper, product and trend analyses, that will result in location recommendations that match retailers, products and shoppers, across our portfolio.”

Eastern Europe

Our interests in Eastern Europe (EE), held through a 60% stake in UK-based Hystead Limited, reflect a continued difficult trading environment. Recovery from the first wave of lockdowns was slow and in November 2020, when a second wave of infections hit the region, restrictions were re-imposed. However, with the roll-out of vaccines in Europe, we expect conditions to improve in the second half of 2021.

The vacancy in the EE portfolio was 0.4% at end-December. 23 new stores were opened in the six-month period, and another 23 are planned for the first quarter of this year. Replacement tenants have been secured for six of the seven stores to be vacated by the Inditex Group as part of their restructuring. The countries where our malls are located were in good economic standing before Covid-19 and we believe our malls will bounce back quickly as vaccines are rolled out and the impact of Covid-19 dissipates.

Sub-Saharan Africa

Hyprop has previously announced plans to reduce its exposure to sub-Saharan Africa. The previously announced disposal of our 75% interest in Ikeja City Mall in Nigeria remains subject to the fulfilment of certain conditions.

Since the relaxation of trading restrictions in Nigeria and Ghana, key metrics have improved and trading densities for 2020 are higher than in 2019.


In the short-term, Hyprop’s strategy will centre around reducing its debt further, limiting capital expenditure to projects already committed or essential, continuing the disposal of assets such as those in the sub-Saharan portfolio and Atterbury Value Mart, as well as recycling other assets that do not fit into our long-term strategy.

On a longer-term basis, the Company will continue to reposition the SA portfolio, increase the dominance of the properties in the European portfolio, and pursue the non-tangible asset strategy.

“Although we expect to face further challenges in the next two years, we believe the strength of our dominant retail centres in mixed-use precincts in key economic nodes within South Africa and Eastern Europe, our partnerships with our tenants and the agility of our responses will enable Hyprop to meet and overcome these challenges,” says Wilken.

“Our initiatives to grow the group’s non-tangible asset base are being intensified and we are making good progress.”