Hyprop bails out of its R4bn stake in the rest of Africa
Blue-chip mall owner to rather fix its SA and European portfolios by upgrading certain assets and selling others
Hyprop Investments, the owner of shopping centres including Mall of Rosebank, Hyde Park Corner and Canal Walk, will exit its R4bn operations in the rest of Africa because of trading difficulties.
The company, which has been operating for 30 years, is trying to recover from a slump that has seen its share price drop to a three-year low and its dividend payouts weaken. Hyprop wants to spend the next year repositioning its local and European portfolios by upgrading certain assets and selling others.
Chief investment officer Wilhelm Nauta said the group and its partners on the African continent, Attacq and Atterbury, will sell their interests together in the next few months.
“This will decrease our loan-to-value and let us focus on investments which offer long-term returns to the fund,” he said.
Hyprop’s sub-Saharan African portfolio includes interests in Accra Mall, West Hills Mall and Achimota Retail Centre, all in Accra, Ghana; Kumasi City Mall in Kumasi, Ghana; Manda Hill Centre in Lusaka, Zambia; and Ikeja City Mall in Lagos, Nigeria. Its African exposure was valued at about R3.8bn at the end of December 2018.
“Getting African commercial real estate to work in a SA-listed fund is very difficult. There are cash flow issues which don’t work when you have to meet shareholders’ demands and pay out income on a regular basis,” Nauta said.
The retail-focused real estate investment trust had tried to decrease its debt while trying to make profits in SA, where disposable income growth is subdued, said CEO Morne Wilken, who took over at the beginning of 2019.
Hyprop’s share price closed at R69.50 on Friday, down about 15% in 2019. Over three years it has fallen 43.6% from R119.80 reached on May 23 2016.
Hyprop’s FD Brett Till said once Hyprop exited the rest of the continent, it would bring immediate relief to the company’s loan-to-value. “Then we can use our capital to improve our local assets. Better offerings from these malls will attract more customers even if the health of the SA consumer is under severe pressure and there is less disposable income being used for shopping,” he said.
Wilken said Hyprop would upgrade certain SA centres and would consider selling underperforming ones.
“We aren’t forced to sell anything but if we get good prices we would consider it. Our notable capital expenditure project for now is bringing Ratanga Junior to Canal Walk. So there will rides and entertainment added to the mall, which needs a rejig to perform as we want it to,” Wilken said.
He said he and his team needed about a year to get Hyprop on to a better track and momentum back in its share price.
Keillen Ndlovu, head of listed property funds at Stanlib, said Hyprop could pull off a recovery fairly quickly given that it owned high-quality assets.
“Despite Hyprop owning some of the best retail assets in SA, it is trading at over 30% below its net asset value. This makes it look very cheap relative to the sector, which is trading at about 10% below net asset value,” said Ndlovu.
“For Hyprop to come back, it simply needs to restructure or simplify its rest of Africa and central and eastern European debt,” he said.