Hyprop provided a financial guarantee for the funding of the acquisition of Hystead’s investments in the Delta City shopping malls in Serbia and Montenegro (refer to note 34 – Financial instruments – Fair values and risk management). Hyprop also provided a guarantee for the funding of the acquisition of Skopje City Mall in Skopje, Macedonia.

Hyprop has agreed to guarantee the due and functional performance of obligations in terms of the Euro funding agreements and has given certain undertakings to and in favour of FirstRand Bank Limited (acting through its Rand Merchant Bank division).

During the year, part of the bridge loans that funded the initial acquisition in South-Eastern Europe were refinanced into three-year term loans. The refinance of the bridge loans resulted in an increase in the tenure of the Euro funding, with a consequential change in the underlying guarantees from Hyprop.

Recognition of the revised guarantees at fair value has resulted in a charge to the statement of profit or loss and a change in the fair value of investment in joint venture relating to the investment in Hystead.

The valuation of these guarantees is dependent on estimated credit spreads and forecast cash flows and interest rates, which require significant judgement. The value of the guarantee provided by Hyprop was determined to be R163,8 million (2016: negligible). The JV partner has also provided an indemnity and security equivalent to 10% (2016: 10%) of the acquisition cost of the investments in South-Eastern Europe.