Hyprop Investments, a JSE-listed real estate investment company, said it made good progress in executing its strategy for the fiscal year ended June 30.
It made progress on all its priorities, in particular strengthening the balance sheet, advancing the implementation of its non-tangible strategy with the successful opening of the SOKO district in Rosebank Mall and the repositioning of its South African portfolio by deploying its ” Golden thread “.
SOKO is the world’s first platform that allows digitally-focused retailers to access flexible physical space, reserve that space, and sign a lease for that space in less than ten minutes online.
The golden thread involves the continued repositioning of South African shopping centers around three key pillars: place, brand and people. Hyprop is moving from a traditional mall structure to an omnichannel environment that offers customers personalization and experience-driven spaces.
The group’s distributable profit for the year was 1.04 billion rand, or the equivalent of 336.5 ca, following a 21% increase in the number of shares outstanding following the reinvestment plan of dividends 2020 (DRIP) and an acceleration in book creation in April. .
The results were also impacted by negative reversals and the effect of rent discounts granted to tenants in difficulty and by 119 million rand less on the income received from its subsidiary in Eastern Europe, Hystead, which reduced Group distributable profit of R 278 million, or 90 cents each.
A dividend of 336.5c has been declared and shareholders will have the option of reinvesting the net dividend in cash in exchange for additional Hyprop shares via a DRIP.
During the year, the group repaid more than R 1 billion in debt, bringing the total debt repayments over the past two years to more than R 2 billion.
The year-end Loan-to-Value (LTV) ratio of 37.2% was well below the LTV covenant of 50%. The R1.1 billion proceeds received from the sale of Atterbury Value Mart, which closed just after the end of the year, will further reduce the LTV to 34.9%.
The interest coverage ratio was constant at 3 times, helped by a decrease in net interest expense from R 548 million to R 522 million.
Hystead accepted an offer to sell Delta City, Belgrade, Serbia, for 115 million euros, with the proceeds to be used to reduce Hystead’s euro 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 revenue increased 3%, and retail density decreased 2.5%. The total vacancy of shops remained stable at 2.4%.
Some of the major new rentals in 2021 included Checkers FreshX stores at Rosebank Mall and Woodlands and Starbucks stores at Canal Walk, Somerset Mall and Woodlands.
New leases were signed with the buyers of the old Edcon banners and exposure to CNA was reduced from five stores to one through relocations.
Hystead assets, meanwhile, took longer to recover from the pandemic than South African centers due to lockdowns, to varying degrees, between November 2020 and May.
Most Eastern European centers resumed normal operations from the end of April, but some restrictions remain. The average monthly attendance was 15.6% lower than in 2020 and the density of exchanges fell by 7.6%. However, per capita spending was 12.9% higher.
The retail vacancy rate was 0.3%, underscoring the dominance of these centers in their markets. During calmer business conditions, some of the facility upgrade projects were completed.
Trading conditions in Nigeria and Ghana remained difficult, reflecting economic conditions in the region; however, Ikeja Mall remains fully leased and has produced a good result, while the commercial performance of Ghanaian malls has improved.
Total vacancy in sub-Saharan Africa stands at 12.1%, while net property income increases by 31%. Hyprop continues to pursue its exit from its sub-Saharan investments.
Hyprop CEO MornÃ© Wilken says the group’s strategy and key priorities remain relevant, even in a prolonged Covid-19 environment.
Key focus areas for the coming year include completing negotiations on the deal 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 Eastern European properties, extracting value from Africa while pursuing the exit strategy and increasing the intangible asset base.
âCovid-19 remains a risk, as does the underperforming local economy. Consumer spending is expected to remain under pressure and consumer behavior will continue to evolve.
“As we anticipate further negative rent reversals in South Africa in the near term, our repositioning strategies and strong balance sheet will allow Hyprop to successfully overcome these challenges and re-establish the basis for long-term growth,” said Wilken said.