Hyprop's business model

Hyprop strives to create sustainable value for our stakeholders and to be a good corporate citizen by operating our business with tomorrow in mind. The pursuit of sustainable value creation incorporates economic prosperity, social responsibility and environmental protection.

The purpose of business is to increase profitability, provide sustainable total returns and create value. To achieve this, management reflects on current opportunities and strengths while exploring ways to mitigate risks and threats.

Creating value for stakeholders: inputs, outputs and outcomes defined

As an income-focused REIT, Hyprop creates value for investors and other stakeholders by owning and investing in quality shopping centres, benefiting from active asset management based on ethical leadership and sound corporate governance principles. This results in sustainable real estate investments, which generate long-term capital and income growth.

INPUTS		OUTPUTS	OUTCOMES	VALUE CREATION
Business activities		Product and services delivered	Short, medium and long-term sustainable value creation from business activities	Value created is shared by investors and other stakeholders
Financial capital Responsibility: Income growth and capital appreciation
Financial management	Sources of funding: debt and equity	Capital growth Income growth Relatively low loan-to-value ratio Disposal of non-core assets	Increase in NAV of 6,1% Loan to value of 30,8% Distribution growth up by 14,2% Proceeds of disposals used to reduce debt	Shareholders Value is shared through dividend payments and growth in the Hyprop share price Suppliers Our value chain supports job creation Employees Development, reward and long-term incentives to retain a skilled and motivated workforce Tenants The quality of our malls and superior tenant mix attracts customers, creating value for tenants Communities Communities benefit from the numerous socio-economic development projects managed through the Hyprop Foundation annually Hyprop malls attract a range of retailers, contributing to job creation for communities in and around our shopping malls
Manufactured capital Responsibility: To ensure manufactured capital generates capital appreciation and income growth
Own and invest	Own high-quality, dominant shopping centres in large metropolitan areas in strong economic nodes Seek expansion and redevelopment opportunities in existing shopping centres Pursue appropriate yield-enhancing acquisitions Effective capital and debt management	Real estate investments which provide superior long-term investment returns Geographic diversification in high-growth emerging markets Superior returns for investors	Further expansion into sub-Saharan Africa — acquisition of Ikeja City Mall (Nigeria) and development of Achimota Mall (Ghana) Acquisition of Delta City malls in Belgrade (Serbia) and Podgorica (Montenegro)
Intellectual capital Responsibility: Intellectual property and corporate culture are critical to preserve, grow and retain skills
Leasing	Earn rental Rent collections Lease agreements Manage occupancy level Manage tenant arrears	Strong contractual rental escalations Improved tenant mix Dedicated leasing executives and national legal executive Turnover densities	Occupancy rate improved to 98,9% Arrears at 0,5% of rent
Asset management	Active internal asset and property management to maximise efficiencies and pursue opportunities Property maintenance	Well-managed portfolio of properties that generate growing income Rising property values Extracting synergies, e.g. national service contracts Well-contained cost structure	Investment property (SA) improved cost-to-income ratio of 33,2% from 33,6%
Information management	Secure IT systems to improve efficiency of assets, employees and operations	Integrated electronic property management system Internal functions such as human resources driven by technology	Continuity and synergy
Stakeholder communication	Transparent stakeholder communication	Dedicated investor relations manager, marketing executives and compliance officer	Effective controls and processes supporting transparent disclosure Refer to Stakeholder engagement
Natural capital Responsibility: To ensure that operations (occupation and redevelopment of properties, day-to-day activities) limit their impact on the environment
Environmentally efficient properties	Energy, carbon emission, water and waste-reduction targets Green building principles Resource management Environmental strategy Voluntary participation in global environmental benchmarks	Reduced environmental footprint Environment-specific risk assessments Projects to improve energy efficiency (such as Clearwater Mall’s solar photovoltaic plan	Improvements made to an already small environmental footprint Refer to Natural capital: environmental impact
Human capital Responsibility: To grow and nurture the talent, knowledge and skills of our people
Ethical leadership	Regulatory compliance and corporate governance Experienced board Hands-on executive management	Strategic risk management and investment strategy to protect and grow the business Strong compliance with regulatory requirements Top rating in independent governance instrument	Strategic risk management and investment strategy to protect and grow
Employee management	Employee development programme Education and training Employment equity Black economic empowerment Remuneration policy Health and safety policy	Develop staff productivity Low staff turnover Addressing skills shortage Share incentive scheme to retain executive management and align with company vision and strategy Safe and healthy working environment	Training targets exceeded Key skills retention Skills development Diversity Succession planning Refer to Human capital: employee development
Social and relationship capital Responsibility: To ensure interactions with local stakeholders are meaningful and constructive
Corporate social investment (CSI)	Hyprop Foundation Community development Monitor staff participation in CSI initiatives Connecting with shoppers	Sustainable social responsibility through education, training and enterprise development Further development of Hyprop Foundation activities and community interactions	Opportunity to give back to stakeholders and community