PRESS OFFICE

Hyprop embraces several projects to embrace changing retail trends

Hyprop, South Africa’s largest listed retail-focused REIT, with interests in malls in Africa and Eastern Europe, reported in a pre-close statement ahead of its 31 December 2020 interim closed period that most of its key trading metrics in South Africa have improved since it reported on its 30 June 2020 year-end.

“We are encouraged by the relaxation of lockdown restrictions in South Africa over the last five months, which is helping to normalise trading,” says Hyprop CEO Morné Wilken. “With restaurants and other entertainment tenants able to operate at higher capacity, we expect further improvements in footfall and rental recoveries over the medium term.

“The repositioning of our local malls are progressing well and we are continuing to focus on creating safe environments and spaces where people can connect and form part of a community while staying abreast of changing retail trends.”

South Africa
In the South African portfolio, most of the key trading metrics have improved since the end of June. Overall trading density has improved from 13% down year-on-year at the end of July to only 0.9% less than the same period last year, while rental arrears were reduced from R164 million to R135 million by the end of October.

Although some tenants, mainly in the travel, leisure, health and beauty and entertainment sectors, continue to require rent relief in the short-term, most rental relief negotiations have been resolved and cash collection rates are expected to increase going forward.

There is strong interest in the company’s malls from tenants wishing to take up space and leasing strategies are in place to address high risk tenancies. Canal Walk celebrated 20 years of retail excellence in October 2020 with strong demand from national retailers to open flagship and superstores in the mall. Canal Walk welcomed the first Starbucks in the Western Cape in November.

Somerset Mall is currently fully let with a new Cotton On superstore that will start trading in December. Since 30 June 2020 a new Mr Price flagship store, Mr Price Sport and new format Mr Price Home store opened at Cape Gate. The mall also welcomed a new Cotton On superstore. Milady’s has launched a new concept store at The Glen.

Pep and HiFi Corporation both opened in Clearwater Mall and Incredible Connection relocated to a new store on the lower level. The centre also welcomed Yokico, a colourful new stationery concept and Old Mutual Bank will be opening in the new year.

“We have introduced a number of new stores in Hyde Park Corner one of which is Kamers Makers that opened their first store in Gauteng. The new Checkers FreshX offering with Starbucks in-store opened today in Rosebank Mall and the construction of the Checkers FreshX and Stax stores at Woodlands is underway in the premises previously occupied by Game. We believe these stores will be catalysts for increased footfall in the respective centres.

“A core part of our strategy is the repositioning of its South African portfolio. The COVID-19 pandemic has reaffirmed that people are social beings, which supports our vison of creating safe environments and opportunities for people to connect and have authentic and meaningful experiences. We are mindful of the changes in consumer spending as a result and are continuously in the process of evolving and adapting our centres to address shoppers’ needs,” commented Wilken.

Management is pursuing several projects to assist it to embrace changing retail trends. These include launching high-speed uncapped Wi-Fi connectivity at all nine of the group’s malls in SA; piloting a new digital offering, SOKO District, which will allow online retailers to integrate with bricks and mortar; piloting a new residential self-storage facility at Rosebank Mall; and launching a clickpark- and-collect service, Pargo.

Eastern Europe
Various countries have introduced new lockdown restrictions in response to the second wave of COVID-19, the harshest of which are in Bulgaria, where malls must close from 28 November to 21 December, with only essential stores allowed to continue operating.

Encouraged by early evidence that points to a milder fatality rate this time around, Wilken said, “Negotiations with potential tenants to replace seven Inditex brand stores earmarked for closure are progressing very well. Reserved, part of the LPP group, will open a 1 700m² shop in August 2021 in Skopje City Mall, Macedonia and the construction of the outside café terraces area is ongoing, with the opening planned for the 1st quarter of 2021. The renovation, relocation and extensions of certain existing tenants are progressing well, while the upgrade of the food court at The Mall, Sofia is 95% complete.”

Balance sheet and capital management
The Group’s LTV was 41.4% and an interest cover ratio (‘ICR’) of 3.03 times was reported at yearend. On 9 November 2020, the Company announced that it has concluded an agreement to dispose of Ikeja City in Nigeria. The proceeds will be applied to reduce debt, lowering it by 3.5% to 37.9%.

“Our liquidity remains strong within the Group with R1.15 billion of unutilised revolving credit facilities and R433 million of cash as at 30 November 2020. The process of recycling some of our local assets is progressing well and any proceeds realised through this process will be used to further reduce debt,” said Wilken.

Publication of interim financial results
Hyprop will publish its results for the six months to 30 December 2020 in March 2021.