Johannesburg - Listed retail property fund Hyprop has taken its first step towards expanding to emerging markets outside of Africa with the acquisition of a 60 percent interest in two shopping malls in Serbia and Montenegro.
Hyprop chief executive Pieter Prinsloo said yesterday that these acquisitions were an attractive investment that complemented its strategy to acquire or develop high-quality, income-producing shopping centres in emerging markets.
“These acquisitions may be the first of further acquisitions in central and eastern Europe and enhance Hyprop’s shopping centre portfolio in South Africa and sub-Saharan Africa,” he said.
“Hyprop’s objective is to have partial ownership of a high-quality shopping centre portfolio in these regions, with a value of approximately e1 billion (R18.1bn) within five years.”
The acquisitions follow Hyprop’s confirmation last September that it was looking for shopping mall acquisition opportunities in other emerging markets.
Hyprop bought a 60 percent interest in Delta City Belgrade from private Serbian firm Delta Real Estate Group and an identical stake in Delta City Podgorica in Montenegro from Hemslade Trading Cyprus and Delta.
The remaining 40 percent stake in both malls has been acquired by Homestead Group Holdings, a company associated with Hyprop non-executive director Louis Norval.
The total purchase price is e202.75 million, of which Hyprop’s effective share is e121.65m.
Hystead, a newly-formed joint venture between Hyprop and Homestead, will effectively hold the ownership in both shopping centres.
Prinsloo said Hyprop had elected to acquire the shopping centres in an offshore joint venture with Homestead because Homestead had significant value to contribute as a result of its knowledge of the area and its access to other potential transactions.
Hyprop financial director Laurence Cohen said both acquisitions were finalised after a comprehensive due diligence to ensure that both met Hyprop’s strategic objectives.
“Both malls will enhance Hyprop’s distributions, as funding rates in Europe are comparatively low and the acquisitions offer a healthy net income return in excess of 8 percent.
“To mitigate currency risk, 100 percent offshore funding has been raised in euros, supported by guarantees from Hyprop,” he said.
Delta City Belgrade, a centre of 29 876m2 with 122 shops and located in New Belgrade, was purchased for e127.75m. Of the purchase price, e111.9m was payable to Delta and e15.8m would be used to settle the existing bank loans.
Delta City Podgorica was acquired for e75m, of which e60.14m is payable to Delta and Hemslade and e14.85m used to settle bank loans.
Prinsloo said the mall’s catchment area had 225 000 people and, with its high-occupancy and balanced-tenant mix including key retailers, it was an attractive purchase for Hyprop.
Delta City Podgorica, a shopping centre of 23 608m2 with 80 shops, is located on the main boulevard in Podgorica, the capital city of Montenegro.
Delta will oversee the management of both malls on behalf of Hystead for 12 months.
Prinsloo said Hystead would over the next year consider setting up a local management office in Belgrade.
Hyprop shares fell 2.27 percent to close at R96.75 on the JSE yesterday.
BUSINESS REPORT