Canal Walk owner Hyprop is setting its sights on expansion in the Western Cape and Eastern Europe after strong performance, with solid demand from tenants and steady growth in turnover at its malls locally and abroad.
Despite global economic volatility, its centres in SA and Eastern Europe remained resilient, contributing to year-on-year growth in tenant turnover and trading density, the group said in its pre-close and operational update for the five months to end-May.
“We will continue pursuing new and organic growth in the Western Cape and Eastern Europe, reposition our SA and Eastern Europe portfolios to maintain market leadership, review and recycle capital as needed, implement sustainable solutions to address infrastructure challenges, and keep our balance sheet strong,” Hyprop CEO Morné Wilken said.
Tenant turnover in the SA portfolio rose 7% while trading density grew 10.2% year on year. Retail vacancies stood at 3.9%, largely due to Edgars rightsizing its stores. The weighted average reversion rate was 2.9%, with new retail deals achieving 13.5% reversion.
“The portfolio performed better in April and May, supported by public holidays, foot count rose 0.1%, with collections up 9.4%. Retail vacancies stood at 3.9% at end-May, mainly due to Edgars’ rightsizing, creating room for new tenants,” the group said.
In Gauteng, Hyprop added six new stores to Rosebank Mall, including Cannafrica and Glow Theory, while Hyde Park Corner will see a boost in August with the opening of a Checkers FreshX. In the Western Cape, Edgars is performing well in its rightsized Canal Walk store, overall leasing activity has been positive, with a notable rise in office demand, the group said.
Somerset Mall, Table Bay Mall and Cape Gate have added a number of new tenants, with leasing activity remaining positive. At Cape Gate, plans to develop satellite offices on a leasehold basis are still in the early stages, the group said.
Hyprop is also focused on solar-PV installations across its centres and has completed the installation of three-day backup tanks and pumps for potable water at all Gauteng centres, with similar projects planned for the Western Cape.
In Eastern Europe, tenant turnover rose 3.5% and trading density increased 4%, despite a 3.3% drop in foot count — mainly due to nontrading Sundays in Croatia and recent store boycotts over rising food prices. Tenant demand remained strong, with vacancies at just 0.1% up to end-May.
While City Centre one East and West in Croatia continued to diversify its retail mix, The Mall in Bulgaria completed several sustainability upgrades, including improved lighting, remote water metering and more durable roofing over parking ramps. Skopje City Mall also saw recent enhancements.
Building on the robust performance of its Eastern European portfolio, the group announced its intention to make an offer as to further expand its footprint in the European market. To finance this move, it raised R808m through a bookbuild.
“We believe the MAS transaction could be a game-changer for Hyprop and will give us access to new countries in the region, namely Romania and Poland. However, before proceeding with the transaction, we must meet certain conditions, with one key condition being approval from our shareholders,” the group said.
It said if the transaction fell through, the funds would be used to reduce debt, support asset management, drive organic growth, advance solar-PV projects and back new investments.
Central and Eastern Europe remains an attractive investment opportunity due to steady economic growth, rising consumer spending, a growing middle class and increased tourism driving demand for retail space.
The group reported it is strongly positioned to make investments, with R1.2bn in cash and R2.2bn in available bank facilities after the receipt of capital raise proceeds. The cash injection reduced the loan-to-value ratio from 36.3% on December 31 to 34.2% at end-May.
Hyprop said it had made significant progress since embarking on its new strategic journey in 2019, including optimising its Eastern Europe portfolio, settling dollar equity debt in the Sub-Saharan Africa portfolio and selling that portfolio in exchange for shares in Lango, a pan-African real estate investment company.
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