Acquisition of flagship shopping centre in Sofia, Bulgaria
UK-based Hystead Limited (Hystead), co-owned by Hyprop Investments Limited (Hyprop) and PDI Investment Holdings Limited (PDI), today announced the Euro 156 million acquisition by its subsidiary Balkan Retail NV of all the shares in Bulgarian company AP Retail I EOOD (AP Retail), which owns The Mall shopping centre located in Sofia, Bulgaria’s capital city. This is Hystead’s fourth South-Eastern European acquisition, taking the portfolio to a gross asset value of approximately Euro 460 million. The transaction will be effective upon approval of the Bulgarian competition authority being obtained.
The Mall is the dominant shopping centre in Sofia and is regarded as one of the best shopping centres in Bulgaria. It has approximately 52 000m² of GLA, with around 200 tenants including the Inditex Group (Zara and four other brands), Peek & Cloppenburg, H&M, Reserved, LC Waikiki, Arena Cinemas, Cortefiel Group (three brands), Starbucks, Intersport, Technopolis, New Yorker, CCC, Mango and Deichmann. The Mall, currently 99,7% leased, also boasts a substantial food court and entertainment area which is a popular leisure destination in Sofia. Included with the transaction is the transfer of a highly experienced shopping centre team of 23, who will remain in place to ensure the retention of critical skills.
The Mall is strategically located in the eastern part of Sofia, on Tsarigradsko Shose (the busiest boulevard in Bulgaria), which connects the city centre with the Trakia Highway leading towards the centre of Bulgaria. The shopping centre benefits from 400 m of frontage, customer friendly accessibility by car and public transportation, with convenient proximity to Sofia International Airport, the Central Business District and the Ring Road. The surrounding node consists of numerous high-rise office and residential complexes with more developments currently underway.
Hyprop CEO Pieter Prinsloo says: “The acquisition ties in with our objective of owning a high-quality shopping centre portfolio in South-Eastern Europe and The Mall meets our strategic investment requirements in terms of quality, tenant mix, location in a capital city and dominance in the market.” Hystead was attracted to Bulgaria with its GDP growth of 3,6% in 2015, 3,3% in 2016 and 2,9% and 2,8% expected for 2017 and 2018, respectively. This acquisition is Hystead’s first entry into an EU country, which will enhance the overall quality and profile of the Hystead fund. “Our ultimate intention is to dual list Hystead and we believe this acquisition will add substantial critical mass to our portfolio.” The initial yield is acceptable and market related for an asset of this quality and located in an EU country capital city. “We expect this investment to enhance Hyprop’s future income distributions,” says Prinsloo.
AP Retail recently signed an agreement for the exclusive right to purchase the vacant and separately owned hypermarket space, formerly occupied by Carrefour, which forms part of the complex. Once this right is exercised, it would allow The Mall to execute a major refurbishment of the area, which will add approximately 14 000m² of GLA and increase the total size of The Mall to 66 000m².
The refurbished new mall level will comprise more than 30 new stores anchored by a supermarket of up to 4 000m² and new market entries for international retailers. The planned renovation foresees a new escalator connection to the back corridor of the ground floor of The Mall, which will improve the internal circulation within the shopping centre. Discussions with potential tenants have already been held and are at an advanced stage, with retailer interest exceeding the available GLA.
Hyprop’s South-Eastern Europe strategy is to acquire dominant shopping centres through Hystead. Hyprop has a 60% interest in Hystead and PDI, a company represented by Louis Norval, holds the remaining 40%. Hystead now owns four properties in South-Eastern Europe, namely Delta City Podgorica (Montenegro), Delta City Belgrade (Serbia), Skopje City Mall (Macedonia), and The Mall in Sofia (Bulgaria).