Hyprop considers a stake in Edcon
The mall owner has a strong interest in the retailer’s survival, given that the owner of Edgars, Jet and CNA occupied 9.2% of its gross lettable area at the end of December
Blue-chip mall owner Hyprop Investments says it might take a stake in Edcon to support the struggling group, which is Southern Africa’s biggest non-food retailer.
Hyprop has a strong interest in Edcon’s survival, given that the owner of Edgars, Jet and CNA occupied 66,781m² of space in Hyprop’s malls at the end of December, or 9.2% of its gross lettable area. Edcon needs about R3bn to survive for the next three years, CEO Grant Pattison told journalists in February.
Hyprop has been working with Edcon to reduce the retailer’s space requirements.
The companies had agreed that 7,563m² would be vacated in the short term, Hyprop said on Friday.
“New tenants have been secured for most of this space and Hyprop is confident of its ability to re-let the balance.”
Hyprop had also agreed to support Edcon as part of the retailer’s proposed restructuring.
This “may include Hyprop subscribing for an equity interest in Edcon”.
If the deal were to go ahead, this would reduce Hyprop's distributable earnings by 0.8% in the 2019 financial year, and a further 2.3% in 2020.
Hyprop said on Friday it grew distributable income by 5.6% to R985m in the six months to end-December as strong growth from its SA and European shopping centres was offset by a lacklustre performance in the rest of Africa.
Owing to a higher number of shares in issue, the real estate investment trust (Reit) grew distributions per share by 2.5% to 385.6c, it said on Friday.
In early trade, the group’s stock was down 1.4% at R76.41.
Hyprop said distributable income from its SA portfolio increased by 8.8% compared with the year before.
Given the tough trading environment, “this performance bears testament to the high quality of the group’s SA property portfolio”.
Distributable income from Hystead, the Reit’s Europe-focused mall owner, increased 16.6%.
“The portfolio continues to exceed expectations with pleasing growth on the back of low vacancies and asset management initiatives,” Hyprop said.
However, the Reit said its investments in sub-Saharan Africa were affected by “deteriorating economic and trading conditions in the region”.
This had resulted in significantly lower cash flows. Distributable income from sub-Saharan Africa plunged 89%.