Hyprop gets offer for two malls
• Retail landlord seeks to raise cash and strengthen its balance sheet
Retail specialist landlord Hyprop Investments is in talks with a number of private buyers to acquire two of its Johannesburgbased malls, in an effort to raise cash and to strengthen its balance sheet. CEO Morné Wilken said Hyprop had received offers that were close to the book value of the shopping centres.
Retail specialist landlord Hyprop Investments is in talks with private buyers to acquire two of its malls in Johannesburg, in an effort to raise cash and to strengthen its balance sheet.
Few listed real estate investment trusts (Reits) have made acquisitions this year, given debt constraints and the need to conserve cash to pay dividends to shareholders.
Hyprop CEO Morné Wilken said at a presentation on Tuesday that the company had received offers for two of its local centres.
Wilken said that Hyprop had received offers, which were close to the book value of the shopping centres. But he did not name the centres.
However, Business Day confirmed on Wednesday that the centres are Hyde Park Corner and Rosebank Mall.
Hyprop is taking steps to decrease its loan-to-value (LTV) below 40% to appease fund managers who are concerned that a high LTV suggests the group is facing too many financial risks.
LTV measures the ratio of a company ’ s debt and its assets.
SA fund managers prefer property companies to have LTVs of 30% to 35% with 40% seen as a maximum before the company starts to show financial risk.
Hyprop ’ s LTV at June 30 was 41.4%.
The group was affected negatively by a fall in the value of its investments as a result of Covid-19, impairments to its African assets and the devaluation of the rand.
CFO Brett Till said this week after the release of financial results for the year to June that Hyprop had spent time taking steps to strengthen the group’s balance sheet.
The group’s dollar-denominated debt was reduced by $271m (R4.6bn) over the past two years, from the proceeds of the sales of African assets and refinancing dollar-denominated debt in rand while R1.2bn of cash was retained from the 2020 financial year to repay debt.
“Strengthening the group’s balance sheet and its exposure to euro- and dollar-denominated debt secured by rand-denominated assets are high priorities.
“These objectives will be achieved by lowering cash _distributions, the exit strategy from Sub-Saharan Africa and recycling assets,” said Till.
Fund managers have said that Hyprop has been looking to sell Hyde Park Corner for a while.
The company’s share price has been under pressure for months, and was down 76% on a yearly basis, closing 0.06% higher at R15.57 on Wednesday.
Meago Asset Management research head Ryan Eichstadt, said that Hyprop was not necessarily selling the malls at the wrong time while SA was rattled by the Covid-19 pandemic.
According to Wilken the “offers are from private buyers”, Eichstadt said
“The pricing commentary suggested that it is not a desperate sale,” he said.
Paul Duncan, investment manager at Catalyst Alternative Investments, said Hyprop had to make moves in its current operating environment. “Based on their LTV and income cover ratio and with the risk of further devaluations, they will have to sell what they can sell and not what they want to sell.
“Big ticket items are incredibly difficult to move and sitting still is not an option. If they transact well, it should be well received,” he said.
The group has stakes worth about R2.4bn invested in malls in sub-Saharan African, which it also wants to sell.
HYPROP HAD RECEIVED OFFERS, WHICH WERE CLOSE TO THE BOOK VALUE OF THE SHOPPING CENTRES
BASED AND INCOME ON THEIR COVER LTV RATIO ... THEY WILL HAVE TO SELL WHAT THEY CAN SELL AND NOT WHAT THEY WANT TO SELL