Hyprop Investments, the owner of Rosebank Mall, Hyde Park Corner and Canal Walk, says it could fetch R4bn by selling its investments in the rest of Africa as it looks to settle its dollar-denominated debt.
Hyprop has taken a hit on its rest-of-Africa investment, having impaired that business by R1.1bn earlier in 2019. In May, the real estate investment trust’s (Reit’s) chief investment officer, Wilhelm Nauta, said Hyprop and its partners, Attacq and Atterbury, who have co-invested in malls on the continent in a fund called AttAfrica, would together sell their interests in 2019.
Hyprop is also grappling with a debt burden that ratings agency Moody’s Investors Service says is too high.
Hyprop said on Friday that AttAfrica, in which it owns a 37.5% stake, had agreed to sell its interest in Ghana’s Achimota Retail Centre.
Hyprop said it would use the proceeds to settle a portion of its dollar-denominated debt.
On Friday, Hyprop CEO Morne Wilken declined to reveal the identity of the Achimota buyer.
“We have signed confidentiality agreements with the potential purchasers,” he said.
Wilken said another asset sale elsewhere in Africa could be wrapped up within a month.
The next phase of the disposal process would focus on Nigeria’s Ikeja Mall, while the third phase would focus on the balance of the portfolio, with a targeted completion date of mid-2020.
The disposals would probably generate about R4bn in proceeds, Wilken said.
Together with plans to “recycle” R2.4bn in assets in SA and elsewhere that would probably reduce Hyprop’s loan-to-value (LTV) ratio to the target of 35%. Moody’s says the landlord’s loan-to-value ratio is currently at 43%.
Hyprop Group CFO Brett Till said reaching the 35% target “is not an insurmountable task”.
As part of a broader debt restructuring, Hyprop recently replaced a $100m debt facility, on which it paid interest at about 5%, with a R1.4bn facility in SA.
Since the rand-denominated facility attracted an interest rate of about 8.8%, it would probably cost about R50m or R60m more to service, according to Wilken.
Wilken said Hyprop had earmarked assets to sell in SA and other regions as part of its “capital recycling” plans. The landlord would also consider swapping assets with other groups to improve its portfolio, he said.
Meanwhile, while Hyprop canned a plan in 2018 to separately list UK-based Hystead, which houses its European investments, Wilken said the company was “looking at some other avenues” for that business.
“We are quite excited about Eastern Europe,” he said.
Hyprop’s share price is down 13.24% year to date and 31.73% on a one-year basis.
Fund managers have been pleased at the pace at which Hyprop has taken steps to alleviate its challenges. This included managing Edcon, SA’s national retailer which has been downsizing across the country.
“Hyprop continues to reposition the portfolio both in SA and abroad. On the retail side they have spent quite a bit of time shrinking the Edcon gross lettable area from 66,781m² down to 50,871m². Edcon’s percentage of gross income is now under 7.6%,” said Nesi Chetty, senior portfolio manager at Stanlib.
“The key focus will continue to be bringing the LTV down in the business. Asset sales in Africa are helping. All proceeds from sales should be used to pay down US dollar debt,” he said.
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