Hyprop Investments, the company that is considering hiving off its older assets as it tries to turn its operations around in a difficult environment, plans to keep its crown jewels.
Hyprop has long been considered one of the JSE’s real estate darlings, having built up a portfolio of some of SA’s best blue-chip malls — including The Mall of Rosebank, Clearwater, Cape Gate, Somerset Mall and Canal Walk — since it listed in 1988.
But the share price of the company, which has a market capitalisation of R18.55bn, has plunged 46.95% on a three-year-basis as it has had to operate in a weak local environment where it has given some national tenants rental reductions while weak consumer spending growth persists. It also participated in the bailout of Edcon by taking a stake in the retailer and decreasing its rent.
Some of its peers such as Vukile Property Fund, which has a market capitalisation of R18.6bn, have fared better on a capital growth basis with an 11.78% rise. The share price of Investec Property Fund, which is worth about R11.1bn, has grown 3.49% on a three-year basis.
Hyprop is considering an offer for one of its assets, CEO Morne Wilken said on Wednesday.
Wilken said the SA property portfolio is not for sale, but if the company is offered attractive prices for some of its assets, it would consider it.
“We are improving the tenant mix and repositioning our malls. Typical customer bases have changed at some of our centres and some of our clientele has changed how it shops with the rise of online shopping. We are looking at selling one of our assets if we get an appropriate price for it,” he said.
Hyprop has room to sell some of its older assets to reduce its debt levels, which have become “slightly elevated”, Yusuf Mowlana, a portfolio manager at Prudential Investment Managers, said.
“The debt metrics are elevated versus history, but not so bad to pose a threat to the company’s operations. The company’s competitive advantage is in SA, though there are likely assets within the SA portfolio that are more mature and could be disposed of,” Mowlana said.
“The rest-of-Africa assets are for sale and we tend to agree that the company needs to focus on where its advantage lies and to realise its net asset value while it trades at such a steep discount,” he said.
Moody’s Investors Service said earlier in 2019 it is concerning that Hyprop’s loan-to-value is about 43% as this weakens its balance sheet. Hyprop may struggle to cover certain debt payments in the future.
Hyprop recently sold a stake in a mall in Ghana and will sell more assets to bring its loan-to-value below 40%, Wilken said.
Two malls that are among Hyprop’s oldest assets are Hyde Park Corner and The Glen, and fund managers have said there could be buyers for these assets, which have rarely been on the market.
Jay Padayatchi, executive director at Meago Asset Management, said he expects Hyprop to consider offers on its local assets while it works on reducing its loan-to-value.