Monday, 5 December 2022. All of Hyprop’s dominant retail centres in South Africa (SA) and Eastern Europe (EE) have continued to enjoy more buoyant trading conditions over the last few months. These favourable trading conditions, together with the group’s strong balance sheet, should help it to tackle challenges such as rising inflation, higher interest rates, increased energy costs and socio-political changes, says CEO Morné Wilken.
“Risk in the current economic environment remains elevated and fluid, requiring caution and conservatism in our approach and strategy,” Wilken says. “We continue to focus on generating sustainable total returns for shareholders, reducing debt, and allocating capital prudently to diversify risk and optimise returns.”
In a pre-close operational update, Hyprop reported that it held R2.4 billion of unutilised revolving credit facilities and R814 million in cash at 31 October 2022. The loan-to-value (LTV) ratio was 38.2%, after paying the dividend for the 2022 financial year and implementing a dividend reinvestment plan (DRIP), which raised R500 million in new equity and was supported by 84.4% of shareholders.
Hyprop has continued ensuring its portfolios remain relevant in line with its repositioning strategies whilst driving initiatives related to recycling materials, reducing waste, managing assets to be more energy- and water-efficient, and reducing carbon emissions in line with its environmental strategy. Specific initiatives include installing solar PV at all Gauteng centres as well as Propelair toilets (which are more water-efficient) at three sites, to be rolled out in most local centres over time and employing various organic waste management technologies.
South African portfolio
Foot count through the South African centres continued recent positive trends, with a 7.1% increase in the four months to end-October 2022 over the same period in 2021. Foot count on Black Friday was 8% higher than in 2021, and tenant turnover for the four-month period grew by 16.9%. Demand for retail space remains robust and many retailers are trading better than they were before the pandemic. Retail vacancies remained low at 1.3%.
Some of the new store openings across the portfolio include Scape Goat Gallery, George’s Grill House and Versailles Luxury at Hyde Park Corner; Huawei, Cosmic Comics and Freedom of Movement at Clearwater Mall; and at Canal Walk, South Africa’s first Nike Live store as well as the Western Cape’s first Xaomi and SPCC stores.
The centres are well-positioned for the approaching festive season.
Eastern European portfolio
Tenant turnover, trading density and foot count have improved significantly since the lifting of Covid-19 restrictions in Eastern Europe earlier this year. Vacancies remain low at 0.5%, confirming the dominance of the centres.
The centres performed very well over the Black Friday weekend, with foot count up 19.6% on the Friday and 23.1% on the Saturday compared with the previous year.
Highlights include various store renovations by tenants. Six new stores have opened at The Mall in Sofia and the planned revamp of H&M in 2023 will incorporate Bulgaria’s first H&M Home. At Skopje City Mall, the first Kiko Milano in North Macedonia has been launched. City Center one East’s tenant mix was improved Ghetaldus Optika was relocated to the upper level to create an optometrist cluster on this floor.
Increased costs of electricity, fuel and gas are driving inflation in EE, which impacts tenant occupancy costs.
“We are closely monitoring tenant performance on a monthly basis and have granted temporary rent relief to some tenants in exchange for future rental escalations and longer lease tenure,” Wilken says.
Sub-Saharan Africa (ex-SA) portfolio
At Ikeja City Mall in Nigeria, trading at the new Nike store has exceeded expectations since its opening in August 2022. The centre is performing well, with one vacancy of 166m². Hyprop is working with Actis to implement the sale of Ikeja and considering various options, including a partial sale of our investment.
In Ghana, turnover and trading density have been hit by the 144% depreciation of the Ghanaian cedi against the US dollar since January 2022. However, vacancies have reduced to 12.7% in October from 13.4% in June as a result of focused asset management. Accra Mall, West Hills Mall and Kumasi City Mall are all celebrating new store openings. An exit agreement was concluded with Game in Ghana and there is good progress in re-letting their space.
Release of interim results
Hyprop’s interim results for the six months ended 31 December 2022 are scheduled to be released in March 2023.
