Morne Wilken. Picture: ARNOLD PRONTO
Morne Wilken. Picture: ARNOLD PRONTO

Hyprop Investments, the owner of shopping centres including Mall of Rosebank, Hyde Park Corner and Canal Walk, will exit its R4bn rest of Africa operations 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 was trying to decrease its debt levels while trying to make profits in SA where disposable income growth is subdued, CEO Morne Wilken said.

Wilken has been in his role since the beginning of 2019.

Hyprop’s share price closed at R69.50 on Friday, down about 15% year to date. On a three-year basis it was down 43.6% from the R119.80 price it closed at on May 23 2016.  

Moody’s Investor Service said in February that it was concerned that Hyprop would have to rely on external financing to cover its offshore debt related to its investments in southeastern Europe. Moody’s said the company’s loan-to-value (LTV) was sitting at 43%, which was concerning. But Hyprop’s FD Brett Till said according to his calculations, the LTV was 34%.   

He said once Hyprop exited the rest of the continent, the LTV would drop 3% or 4%.

“It will bring immediate relief to our LTV. 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 South African 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 its 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 an array of 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.

andersona@businesslive.co.za