Strong trading metrics across real estate investment trust (Reit) Hyprop’s portfolio of retail properties in mixed-use precincts in key economic nodes for the six months to December 31, 2022, have led the company to conclude that these areas have recovered from the impacts of Covid-19 and that retail remains relevant to consumers.

Distributable income for the period increased by 36% year-on-year to R728-million and distributable income a share grew by 30% to 203c.

Eastern Europe delivered R243-million of distributable income during the six months, exceeding the financial year 2023 forecast by about 15%.

“The positive momentum across the South African and Eastern European portfolios demonstrates our responsiveness to our tenants’ and shoppers’ needs, while embracing relevant technologies – despite the current challenging operating environment . . . We are well on our way to delivering on our purpose of creating spaces and connecting people,” Hyprop CEO Morné Wilken said on March 17.

During the six months under review, Hyprop raised R500-million in additional capital through the 2022 financial year dividend reinvestment alternative and reduced its euro borrowings by €29-million. At the end of the period, the Reit held R1.4-billion in cash and R2-billion in available bank facilities. Its loan-to-value was at 37.2% at end-December from 36.4% at end-June, largely as a result of the weakening of the rand against the euro.

Moreover, Hyprop will be raising R500-million – with potential upside to R750-million – by bond auction on March 31. In addition, the Reit said proposals had been received to refinance the R1.46-billion of debt that matured in June and were being adjudicated.

SOUTH AFRICAN PORTFOLIO

Hyprop’s tenant turnover rose by 15.5% year-on-year, with December trading, in particular, being strong, as Canal Walk reached a record turnover of over R1-billion that month.

Overall, trading density lifted by 14.4% and foot count rose by 5.9% to 39.6-million people. Demand for retail space remained robust as well, with retail vacancies reducing to 1.5%, down from 2% in June 2022.

Hyprop highlighted several successes, such as Canal Walk adding a diverse range of new retail tenants, such as Ted Baker, Samsonite and Yuppiechef.

In addition, Somerset Mall managed to remain fully let and extensions to the gross letting area are being considered to accommodate additional demand.

At Rosebank Mall, new stores were added, including Footgear, Hi-Fi Corporation and Volpes, and the upgrade of the Clearwater Mall food court resulted in an increase in turnover of restaurant and entertainment tenants.

Hyprop said it would continue to prioritise further capital investment to include additional solar photovoltaic (PV) installations, which would be in line with its sustainability targets and to mitigate the high cost of the heightened and longer periods of loadshedding.

This would include the next phase of solar PV installations at Woodlands, Rosebank Mall and Clearwater Mall.

Additionally, new solar installations at Canal Walk and CapeGate are also under way. Hyprop said it also planned to integrate its existing solar and generator capacity with battery storage at its centres.

EASTERN EUROPEAN PORTFOLIO

Hyprop’s Eastern European retail centres performed positively as well, with tenant turnover up 14.1% year-on-year and foot count 16.1% higher than the year before at 13.9-million. The vacancy rate was only 0.6% at end-December.

Highlights across the portfolio included two new tenant openings at Skopje City Mall, in North Macedonia, while others relocated to right-sized spaces or undertook refurbishments.

City Center one East in Croatia also added new tenants, while extensions to the centre are being considered to assert its dominance in the catchment area.

Additionally, the Mall in Sofia, in Bulgaria, opened several new retail stores, including Jack and Jones, Cool Club, Robert James Whisky, Brilliant Furniture and My Geisha, while several other stores were refurbished.

All four properties in the portfolio are undergoing building research establishment environmental assessment method audits, which is a science-based certification system that rates buildings’ sustainability performance. These will be concluded by June 2023.

SUB-SAHARAN AFRICA

Overall, portfolio vacancies in Hyprop’s sub-Saharan African (SSA) centres – excluding South Africa – have decreased to 7.8% in December 2022 from 10.1% in the previous financial year.

Although retail store Game exited Ghana at the end of the period, Hyprop said there was progress in identifying replacement tenants.

Foot count across the portfolio decreased by 7% year-on-year, with turnover and trading density in Ghana being impacted by the depreciation of the Ghanaian cedi against the dollar.

At Accra Mall, in Ghana, new openings included Maestro, Chocolate Sayari and Yetra E-Gaming, which is an e-gaming centre.

Meanwhile, at Kumasi City Mall, Kidsville and Tecno were added to the tenant mix.

Hyprop said the lack of dollar liquidity in Nigeria continued to delay the completion of the sale of Ikeja City Mall.

ESG

Hyprop rolled out a zero wet waste programme in the six-month period. It said that, as the centres are improving their recycling of wet waste, the recyclable dry waste is less contaminated, so the level of dry waste recycling is increasing steadily.

Various programmes were also implemented to manage water use, such as the installation of Propelair toilets at CapeGate and Woodlands, while the second phase of the programme to convert air conditioning units at some of the Hyde Park stores from water to air-cooled condenser units has been started.

OUTLOOK

As part of Hyprop’s strategic priorities, the management team said it would continue to pursue sustainable solutions to loadshedding and its effects while repositioning the South African portfolio.

The Reit would also like to retain its strength in the Eastern Europe portfolio. Hyprop said it would conduct yearly reviews of the portfolio to consider recycling assets and growth opportunities, thereby protecting value in the sub-Saharan African portfolio, pending an exit. The Reit said it would continue developing non-tangible assets as well.

“In light of the difficult global economic environment and unique challenges in each of the regions in which we operate, such as the deteriorating infrastructure in South Africa, high inflation and energy costs in Eastern Europe and unavailability of dollars in sub-Saharan African, we remain cautious in terms of our short- to medium-term prospects.

“However, we believe that we have created a solid base from which we will continue to execute our key strategic objectives and deliver long-term value for all our stakeholders,” Wilken said.