HYPROP Investments, the real estate investment trust (Reit) that owns a R43.3 billion portfolio of retail real estate in South Africa and Eastern Europe, is shifting out of the traditional shopping mall structure and into omni-channel to cater for consumer behaviour that has changed through the Covid-19 pandemic.
The owner of up-market malls such as Canal Walk in Cape Town, and Hyde Park Corner and Rosebank Mall in Gauteng, is, like other retail centre owners around the world, acing a Covid-19-induced speeding up of data driven shopping trends, but while e-commerce has grown rapidly, shoppers have also returned to centres as pandemic lockdowns have eased.
Hyprop chief executive Morné Wilken said at the release of results for the year to June 31 that the group was making good progress to reposition its South Africa portfolio, by, for example, the opening of the Soko District at Rosebank Mall, and progressing the group’s “Golden Thread” strategy.
Soko claims to be the world’s first platform that enables digital-first retailers access to flexible physical space, book the space, build a store, and sign a lease in under 10 minutes online.
It also provides landlords with access to a platform that allows them to manage a pipeline of digital-first retailers, he said.
The Golden Thread involves repositioning Hyprop’s local shopping centres around three pillars – place, brand and people – so that there is excitement, personalisation, and experience-led spaces at its malls.
“The repositioning will create a distinct personality around a ‘town square’ concept and allow all Hyprop malls to be connected through a unified set of services, offerings and experiences.
“The goal is to create safe environments and opportunities for people to connect and have authentic and meaningful experiences,” said Wilken.
He said the repositioning of the South Africa portfolio was vital to improving footfall, tenant performance and ultimately rental income growth.
“With the ongoing impact of the pandemic on our centres and the environments within which we operate, we expect relatively low rental income growth for the next two years. This underlines the need to continue to reposition our malls so that they remain relevant in an ever-changing retail landscape,” he said.
Trading for the South African portfolio was below pre-Covid levels. Average monthly footfall was 7.6 percent lower than in 2020, tenant turnover rose 3 percent and trading density was down 2.5 percent. Retail vacancies were stable at 2.4 percent.
Hyprop’s distributable income for the year fell 46.6 percent to 336.5 cents per share, following a 21 percent increase in the number of shares in issue as a result of the 2020 dividend reinvestment plan (Drip) and an accelerated bookbuild in April 2021.
The results were also affected by negative reversions, and the effect of rental discounts granted to struggling tenants, as well as R119 million less income received from Hystead, which reduced the group’s distributable income by 90c a share.
A dividend of 336.5c was declared and shareholders will have the option of reinvesting the net cash dividend in return for additional Hyprop shares through a Drip.
The loan-to-value (LTV) ratio at year-end of 37.2 percent was well below the LTV covenant of 50 percent. The R1.1 billion proceeds from the sale of Atterbury Value Mart, which was completed just after year-end, would further reduce the LTV to 34.9 percent.
An offer to sell Delta City in Belgrade for €115m (R1.9bn) had also been accepted, with the proceeds to be used to reduce Hystead’s euro equity debt.
Hyprop’s share price rose 0.77 percent to R27.43.