The recent collapse of the proposed sale of a 50% stake in Hyde Park Corner barely moved Hyprop’s share price, reflecting a market that has long grown weary of a sale the company has been trying to get done for years.
The mall, which has steadily lost its luxury appeal, has been on the market for some time and faces many challenges, from an ageing building structure and outdated tenant mix to vacant stores and the need for refurbishment, including parking and common areas.
“We were not surprised by the deal not proceeding; if anything we were surprised at how Millenium Equity Partners (MEP) was going to go from a very small portfolio of two assets to being able to buy one of South Africa’s more upscale malls at quite a rich valuation,” said Golden Equity Research MD Garreth Elston.
It is not the only deal to have stumbled for the Canal Walk Mall owner. Its bid to acquire a controlling stake in MAS faltered in July last year after the company declined to grant full access to its development joint venture. Still, Hyprop’s share price rallied 22% over the past year. In April the company resumed its interim dividend
after having withheld it for the 2024 financial year amid heightened risks linked to the sale of its Sub-Saharan African portfolio to Lango.
Like Killarney Mall, owned by Octodec, which has also carried a price tag for years with few suitors stepping forward, Hyde Park appears as though it would be best suited to private investors with the patience, experience and expertise to turn it around, particularly after the creation of Diamond Walk at Sandton City eroded its luxury status.
‘Optimistic price’
The failed Hyde Park deal valued the 50% stake at R805m, which Elston describes as an optimistic price given the asset’s vacancy challenges, limited growth prospects and the scarcity of suitors willing to acquire it.
“Hyde Park Corner used to be the go-to destination for luxury shopping in Johannesburg’s north, but that title has been comprehensively usurped by Sandton City. Most luxury retailers have opted for a single northern suburbs location, closing their mall stores while retaining their Sandton outlets. Over the past 10 years we’ve seen the mall lose names such as Lacoste, Montblanc, Armani and Versace, and the mall has struggled to attract high-end retailers to open new stores,” Elston said.
The mall has managed to attract certain tenants, including Skins, the new Al Capone mixed-brand store and several galleries, though it is doubtful these tenants are paying rents anywhere near what the fashion retailers once did. Even the gallery strategy appears to be struggling, with the Scapegoat Gallery having recently exited the mall.
Vacancy challenge
“The new Checkers facility has certainly helped foot traffic, but it appears that the centre has now also lost Timberland and Vencasa. There is a new Bootleggers opening, but Hyde Park Corner seems to be a constant vacancy challenge for Hyprop,” he said.
“The other retail destinations that Hyprop owns appear to be on a much more stable growth trajectory and investors had been hopeful that the MEP transaction would remove the underperforming Hyde Park Corner,” Elston said.
The group intended to use the proceeds from the sale to fund its renewable energy projects while it focuses on upgrading some of its Western Cape malls and continues pursuing growth opportunities in Eastern Europe.
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