Retail-focused real estate investment trust (Reit) Hyprop said on March 17 that trading performance had reverted back to pre-Covid-19 levels, or in some cases even higher.

The Reit said the improved trading performance was driven by a repositioning strategy, which saw its sub-Saharan Africa portfolio recover well over the past few months.

However, in Hyprop’s Eastern Europe portfolio, more stringent Covid-19 restrictions have delayed the recovery.

Hyprop owns various shopping centres in sub-Saharan Africa and Eastern Europe worth a total value of R42-billion.

“There are signs that the global impact of Covid-19 is reducing and that economies are reopening after two years of Covid-19 restrictions. We are optimistic that trading conditions will return to pre-Covid-19 levels, as is evident in the trading metrics of all our portfolios in the last six months,” Hyprop CEO Morné Wilken said.

In the six months to December 31, 2021, Hyprop grew distributable income by 21% to R501-million on a like-for-like basis. This improvement reflected the reduction in Covid-19 discounts, lower expected credit losses on trade receivables and savings in interest costs owing to a reduction in its debt.

Distributable income a share for the six-month period was 146.5c, compared with 160.6c a year before. The reduction from the comparative period in 2020 was a result of the issue of new shares after strong shareholder support for the dividend reinvestment plan (Drip) for the financial year ended June 2021.

The Drip was supported by 85% of shareholders and raised R876-million in equity. Until market conditions stabilise, the board expects to pay a yearly dividend at year-end.

REGIONAL

In South Africa, Hyprop reported a 5.1% improvement in footcount year-on-year across the portfolio, and an 8.3% improvement in trading density, which it said was testament to the resilience of the centres and the Reit’s repositioning strategy.

Retail vacancies were at 2.4% at the end of December, and these subsequently further reduced to 1.4% by the end of February.

In Eastern Europe, access to most centres was restricted to shoppers with a European Union green certificate – which indicates proof of vaccination, negative antigen test or proof of recovery from Covid–19. Hyprop noted that this impacted on trading metrics, particularly at food courts.

Overall footcount in Eastern Europe was up 12.8% year-on-year and trading density improved by 11.2%. Retail vacancies in the region were at 0.3% in December. Since reporting, many of the restrictions have subsequently been lifted and there is a clear improvement in footfall across all the centres, Hyprop noted.

Across sub-Saharan Africa, footcount rose by 9.1% and trading density improved by 6.7%. Retail vacancies sat at 11.6% at the end of last year.

While Hyprop plans to exit the sub-Saharan Africa portfolio, it is focusing on value creation through active asset management until this happens, which is evident in the improved trading metrics, the company stated.

HYSTEAD

Hyprop currently owns 60% of real estate investment company Hystead, with investment firm PDI Investment Holdings owning the other 40%.

In February, Hyprop announced the conclusion of an agreement with Hystead to acquire four assets within the Hystead portfolio. These core assets are Skopje City Mall in North Macedonia; City Center one East and City Center one West in Croatia; and the Mall of Sofia in Bulgaria.

Hystead’s fifth property, Delta City Podgorica in Montenegro, is in the process of being sold and, until the sale is complete, Hyprop will retain its existing €45-million interest in the asset, representing 60% of the value.

Hyprop said the Hystead transaction was in line with Hyprop’s strategy for its Eastern European portfolio of acquiring premium retail properties in their respective jurisdictions that have the potential for future growth through active asset management and development initiatives, drawing on Hyprop’s South African expertise.

“The transaction is in line with our strategy to further diversify our exposure into Eastern Europe, mitigating the company’s risk to the weaker South African economy; simplify the group structure; and also address some concerns previously raised by shareholders, specifically the Hystead funding structure,” Wilken commented.

OUTLOOK

With inflation at elevated levels in the economies of many of Hyprop’s trading partners, the Reit expected this would continue to put pressure on margins. It maintained that its repositioning strategies were appropriate in a low rental growth environment and were gaining traction.

Hyprop remained optimistic that trading conditions would return to pre-Covid-19 levels, indications of which it said were evident in its six-months trading metrics across all of its portfolios.

“We will also closely monitor the impact of the invasion of Ukraine on our Eastern European portfolio,” Wilken concluded.