reit_sthe

Hyprop Responds to Changing Consumer Behaviour by Advancing the Implementation of its Non-Tangible Strategy

Wednesday, 15 September 2021 – Hyprop Investments, the JSE-listed REIT that owns a R43.3 billion portfolio of retail real estate in South Africa and Eastern Europe (EE), has made very good progress executing its strategy. Hyprop 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 (SOKO) at Rosebank Mall, and good progress in repositioning its South African portfolio by rolling out its “Golden Thread”.SOKO is the world’s first platform that enables digital-first retailers access to flexible physical space, book the space, build a store, and sign a lease in under ten minutes online. It also provides landlords with access to a platform that allows them to manage a pipeline of digital-first retailers. Hyprop currently has a waiting list of 168 online retailers for SOKO.

The Golden Thread entails the further repositioning of the South African shopping centres around three key pillars – place, brand and people. The Company is evolving from a traditional mall structure to an omni-channel environment that offers customers excitement, personalisation, and experience-led spaces. The repositioning will create a distinct personality for the malls around a “town square” concept and allows all Hyprop malls to be connected through a unified set of services, offerings and experiences. Hyprop’s overriding goal is to create safe environments and opportunities for people to connect and have authentic and meaningful experiences.
“The ongoing strategic repositioning of the South African portfolio is vital to improving footfall, tenant performance and ultimately rental income growth,” says Hyprop CEO Morné Wilken. “With the ongoing impact of the pandemic on our centres and the environments within which we operate, we expect relatively low rental income growth for the next two years. This underlines the need for the Company to continue the process of repositioning its malls to ensure that they remain relevant in an ever-changing retail landscape. We are confident that our Golden Thread initiative will assist with just that.”

Financial results

The group’s distributable income for the year was R1.035 billion, equivalent to 336.5 cents per share (2020: 493.4cps), following a 21% increase in the number of shares in issue as a result of the 2020 dividend reinvestment plan (DRIP) and accelerated bookbuild in April 2021.
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 Hystead which reduced the group’s distributable income by R278 million, or 90 cents a share. A dividend of 336.5 cents 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, bringing 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 proceeds 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 3.0 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 for €115 million, with the proceeds to be used to reduce Hystead’s euro equity debt.

Operational performance

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.
The Eastern European (EE) portfolio, Hystead, has taken longer to recover from the pandemic than the South African centres because of lockdowns, to varying degrees, between November 2020 and May 2021. Most EE 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.
Over 40 new stores were opened across the EE portfolio during the year, including brands such as Zara, Pandora, Samsung, Hugo Boss, Ted Baker and Okaidi. Replacement tenants have been secured for the seven stores vacated by the Inditex Group as part of Inditex’s world-wide store reduction strategy.
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 31%. Hyprop continues to pursue an exit from its sub-Saharan investments.

Outlook

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 whilst pursuing the exit strategy, and growing the non-tangible asset base.

“Covid-19 remains a risk, as does the underperforming local economy,” Wilken says. “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 long-term.”

Redefine Tops The Podium At The EY Excellence In Integrated Reporting Awards 2021

Sandton, Johannesburg, 10 September 2021: JSE-listed diversified real estate investment trust (REIT) Redefine Properties returned to the podium, winning top honours in the latest EY Excellence in Integrated Reporting Awards. Adjudged the overall winner for 2021, Redefine’s Integrated Report has consistently featured in the top three for the past five years.

A top 10 honouree since 2015, the first place in this year’s ranking is a strong endorsement of the company’s application of integrated thinking on a wide range of issues such as corporate governance, initiatives to protect the environment, and the way it serves its communities.

The purpose of the awards is to encourage and benchmark standards of excellence in the quality of integrated reporting to investors and stakeholders in SA’s listed sector. The awards are based on how well companies explain to stakeholders how they create value over time and how the board considered material matters to ensure the strategic objectives are met.

Our integrated report communicates our efforts to improve the built environment for people and communities by creating, managing, and investing in spaces in a manner that changes lives.

The report is a vital communication tool conveying to our stakeholders our financial aspects as well as environmental, social and governance strategy, impact and goals. That our report with its transparent and simple content was found to be the best, serves as a benchmark and makes us extremely proud.

We believe the property sector with who all South Africans interact and engage with daily when they go to work, shop and even play should be a visible contributor to practices that preserve the environment and promote social cohesion. Recently Redefine raised R1 billion on the JSE through the issuance of its first sustainability-linked bond. This is the largest amount raised by a local REIT in the growing sustainability-linked bond space.

The COVID-19 crisis has also been a “sustainability” crisis and one that has challenged us to renew our focus on the environment and society, as well as catalyse new approaches to inclusivity and mainstreaming governance. For us, financial results are not the only measure of success, hence our integrated report encompasses our strategy and performance in the area of ESG as well as future expectations, commitments and goals.

Our consistent recognition is a testament to our commitment to the highest standards of corporate reporting and transparent approaches in our disclosures. It also underscores our approach to integrated thinking and the partnerships we share with our stakeholders by presenting information in an engaging and transparent manner.

The recognition strengthens our resolve to further embed key sustainability issues in our strategy and present information in a manner that enables stakeholders to analyse and assess our ability to create and sustain value in the medium to long-term horizon.

The recognition once again demonstrates our leadership in reporting of our sustainability performance and reflects our readiness to build a resilient future. We are deeply encouraged and will continue to integrate sustainability considerations into everything we do.

Redefine Well Positioned For Upside In The New Normal

While the COVID-19 third wave and severe social unrest have hampered sentiment, Redefine Properties says it has trimmed down and simplified it’s local and offshore property platforms, resulting in the de-risking of its balance sheet and providing it with sufficient liquidity to position the company for exciting new opportunities and a potential resumption of paying dividends.

“Our focus has been on implementing our strategy and looking through the cycle, which positions us well for the eventual turnaround,” says Redefine CEO Andrew Konig.

Redefine had resolved not to pay a dividend in respect of the 2020 financial year in the face of ongoing COVID-19 uncertainty, but Konig says the strong progress on preserving liquidity and managing risks means the company, subject to the requisite solvency and liquidity test, expects that a dividend can be paid once again for the financial year.

“Although confidence overall has taken a knock, it has not taken the wind out of the sails of the economy and the momentum from the first half of the year has not been lost. The unrest was severe and very regrettable, however it did highlight the urgent need for socio-economic transformation – an absolute necessity already amplified by COVID-19,” says Konig.

As per the pre-close presentation for the year ending 31 August 2021, Redefine CFO, Ntobeko Nyawo, says substantial progress has been made in de-risking the balance sheet and bolstering liquidity.

“We would like to be at sub-40% on our loan to value ratio and we are making significant progress to achieving this in line with a well-crafted and deliberate plan to right-size our asset platform.”

Nyawo says that despite the tough operating environment, Redefine remained highly cash generative and improved its liquidity with R5.6bn in cash and committed access facilities on hand compared to R2.8bn in the last reporting period.

“This speaks to the quality of Redefine’s portfolio and diversification, as it navigates a tough operating environment.”

Konig says one of the keys to the turnaround will be a pick-up in the vaccination rate. He also believes one of the keys to Redefine’s future success will be ensuring the company adapts and innovates in an inclusive way to meet new, evolving demands.

“The pandemic and social unrest highlighted the need for inclusivity and so our ‘moonshot’ strategy is to focus on this theme. It entails ensuring collaboration with communities and all stakeholders, especially tenants in the office space. We need to ensure we are relevant to our user’s needs all the time. We are also harnessing technology to leverage off data more smartly and to create efficiencies. Our strategy includes driving diversity of thought to stimulate diversification and to reshape funding sources,” says Konig.

He points to the success of the R1 billion sustainability bond – Africa’s largest by a REIT – as an example of this new approach in action to support and grow Redefine’s future business and strategic intent. “It gives us a platform to launch further bonds of this nature, but which are longer dated,” he adds.

Meanwhile, the quantum of the damage caused by the recent looting and unrest “is fortunately less severe than we initially thought, with the rebuilding and reinstatement of properties set to happen faster than anticipated”. Redefine has adequate Sasria insurance cover in place to cover the reinstatement cost as well any losses of income during the rebuilding.

Chief operating officer, Leon Kok, says while the various levels of lockdown and unrest had impacted the retail portfolio, “the recovery trend has been steady and quite positive.”

“The footfall and tenant in-store activity also suggests the very pessimistic outlook at the height of COVID-19 and lockdown was unwarranted. Online retail continues to evolve, but most are embracing a dual strategy and we are looking at how we can enable that as it is clear it is important that in-store experiences are maintained,” says Kok.

He says while economic fundamentals “have not been kind” to the office market, with severe lockdowns impacting livelihoods – there are signs of confidence returning in tandem with the vaccination drive. “A heightened vaccination rollout will support confidence, and we are also seeing more people returning to physical workspaces. We need to ensure we support corporates as they adapt to the new normal, including how they look to use their space,” he says

Kok says the industrial portfolio remains very resilient, notably thanks to increased warehousing and distribution activity. “I am not suggesting we have troughed, but there is still a fair element of deal activity, and I am very confident about prospects.”

Kok sees exciting potential thanks to government lifting the threshold for private energy production without a licence from 1MW to 100MW. “So we can expand existing solar PV installations which were previously subject to the 1MW cap. This is a fantastic opportunity as we expect to expand by just over 12MW across our portfolio, further entrenching our broader ESG ambitions, while we will also achieve greater security over electricity supply.”

Konig says positive news is that Redefine has achieved settlement certainty on the sale of the remaining student accommodation facility in Australia – due on 15 February next year. The sale of the local student accommodation portfolio has also been concluded.

Offshore, the logistics platform continues to expand by way of development activity and valuations are benefitting from strong investor demand.

“We are seeing fantastic opportunities to take advantage of investor demand. For example, we are recycling some of the more mature assets initially acquired at very compelling yields, which will be invested into new developments,” says Konig.

The logistics outlook in Poland remains particularly promising as e-commerce and logistics chains continue to grow in the post-pandemic environment.

“Poland’s economy is bouncing back very quickly and could be at pre-pandemic levels within a year, which bodes well for the retail and logistics in that region,” concludes Konig.

To view the pre-close presentation for the year ending 31 August 2021 please visit www.redefine.co.za

SOKO Launches at Rosebank Mall as Part of Hyprop’s Non-Tangible Strategy

Thursday, 29 July 2021. Hyprop announced that SOKO District will open its doors at Rosebank Mall on Friday 30 July 2021. The word ‘soko’ is Swahili for ‘market’, and a market is traditionally driven by the collective art of buying and selling goods in an open space. SOKO District has created a platform that enables purpose-driven brands to create meaningful connections with their customers through a flexible digital leasing platform, without the significant financial commitments in the traditional retail environment.

At a time when the world is re-setting and actively searching for brands that resonate with the core values of getting back to basics, we welcome SOKO to our portfolio as part of our non-tangible strategy. It is encouraging to see the collaboration between brands, embracing a new concept in a time of everchanging retail,” says CEO Morné Wilken.

Hyprop creates safe environments and opportunities for people to connect and have authentic and meaningful experiences. The company has been exploring how its centres will be increasingly relevant in the 21st century to customers who want public places that bring communities together in a way that is relevant to their changing lives. Customers want a place where they can connect, engage and explore, a place that positively impacts the world around them, and offers exceptional and authentic experiences inspired by the communities they serve.

These principles are guiding the evolvement of Hyprop’s centres in a new world where physical and digital shopping will seamlessly interact, and where our customers will trade transactional time for experiences that add value to their shopping, their interest and their friendships. This is beautifully showcased through the SOKO concept.

Some of the brands which will come to life at the very first SOKO District in Rosebank Mall include environmentally friendly Nu Nues, Annapatat Kids, the Oliver Vagary collection and ceramic studio, Rialheim. Flight, Just Rrrraw Chocolate, Darling Sweet and The Lollipop League will tantalise your tastebuds while luxury fashion brand Mahone The Quiet Junkie will showcase their locally manufactured clothing. Further fashion and apparel brands include, Bummel Shoes, Mós Clothing, Kayla Stam, KoiKoi Clothing, Danielle Frylinck, Era by DJ Zinhle and Ledikana.

There is an alchemy to this new approach to retail which comes from partnering with like-minded entrepreneurs. This new approach is what lies at the heart of the brand storytelling SOKO District has at its core. It’s a deep-rooted desire to encourage customers to experience products first-hand rather than online in a relatable space fostering a sense of community and support for brands. But it is also about offering new brands which have a lot of potential a space to grow and breathe which they would not be able to do in a traditional retail set up. SOKO provides the blank canvas blank canvas for other brands to shine on!

Sustainability is top of mind. Each brand within the District has a completely customisable space which means customers can easily find and recognise their favourite store. From a shop-fitting perspective, nothing goes to waste even retailers would like to update their design, as the old signage is carefully recycled into stylish shopping bags.

X