09 Jun - 12 min read

Pre-close operational update

Pre-close operational update

HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP
ISIN: ZAE000190724
JSE bond issuer code: HYPI
(Approved as a REIT by the JSE)
("Hyprop" or "the Company")


PRE-CLOSE OPERATIONAL UPDATE


Further to the publication of the Company’s Interim Results for the period ended 31 December 2020 on
1 March 2021, the Company hereby provides an operational update for the four months ended 30 April 2021.

Good progress is being made on most of the Company’s key strategic priorities. These are to: strengthen the
balance sheet; reposition the South African portfolio; reinforce the Hystead portfolio’s dominant position; 
exit sub-Saharan Africa (excluding South Africa) (S-SA); and progress the non-tangible asset strategy.

BALANCE SHEET AND CAPITAL MANAGEMENT

At 31 December 2020 the Group reported a see-through loan to value ratio (LTV) of 38.8% and an interest
cover ratio (ICR) of 2.6 times. The sale of Atterbury Value Mart (AVM) is progressing well. All CPs have
been fulfilled and transfer is expected to take place before the end of the financial year, realising over
R1 billion for the Company.

The Company raised R358 million through an Accelerated Bookbuild in May 2021. This, together with the
proceeds from the sale of AVM, will improve the LTV by 3% to 35.8%.

The Group’s liquidity position remains strong, with R950 million of unutilised revolving credit facilities and
R598 million of cash on hand at 31 May 2021.

SOUTH AFRICA PORTFOLIO

It is encouraging that footfall at the malls has increased following the easing of Covid-19 restrictions in 
March 2021. The recovery in footfall, although not back to pre-Covid-19 levels, as well as an increase in average
basket size are promising indicators of an improvement in trading conditions for tenants. We remain cautious
about the current increase in Covid-19 infections in South Africa, the risk of the impact of a third wave, and
possible tightening of lockdown restrictions.

Key trading metrics for January to April 2021 compared to 2020 (partly impacted by Covid-19) and 2019
(a year prior to Covid-19) are presented below. Turnover and trading density have recovered relative to 2020,
but foot count growth remains muted. The retail vacancy rate has improved from 3.0% at 31 December 2020
to 2.6% at the end of April 2021. Retention of key tenants remains critical to the functioning of the malls.

                                                                                              Total for 4 -
 Trading metric              Year            Jan           Feb            Mar           Apr    month period
                                                                                               
 Turnover (R'000)            2019      1 715 933     1 582 640      1 763 075     1 747 540       6 809 189
                             2020      1 740 472     1 629 702      1 459 564       350 668       5 180 406
                             2021      1 423 795     1 518 609      1 657 099     1 634 005       6 233 508
 Variance % 2021vs 2020                   -18.2%         -6.8%          13.5%        366.0%           20.3%
 Variance % 2021 vs 2019                  -17.0%         -4.0%          -6.0%         -6.5%           -8.5%

 Trading Density (R)         2019          2 769         2 557          2 886         2 842           2 763
                             2020          2 786         2 616          2 347         1 851           2 400
                             2021          2 334         2 492          2 724         2 691           2 560
 Variance % 2021vs 2020                   -16.2%         -4.7%          16.0%         45.4%            6.7%
 Variance % 2021 vs 2019                  -15.7%         -2.5%          -5.6%         -5.3%           -7.4%

 Foot count ('000)           2019          7 487         6 714          8 033         7 235          29 469
                             2020          7 554         7 054          6 096         2 120          22 825
                             2021          5 946         5 771          6 320         5 785          23 821
 Variance % 2021vs 2020                   -21.3%        -18.2%           3.7%        172.8%            4.4%
 Variance % 2021 vs 2019                  -20.6%        -14.0%         -21.3%        -20.0%          -19.2%

 % Retail Vacancy            2019           0.9%          0.9%           1.0%          1.0%               -
                             2020           1.6%          1.7%           1.8%          2.0%               -
                             2021           2.9%          2.5%           2.7%          2.6%               -

 Collections (R'000)         2019        262 259       302 954        302 869       349 666       1 217 749
                             2020        291 259       327 977        235 391       126 180         980 807
                             2021        224 815       269 720        276 780       311 685       1 083 000
 Variance % 2021vs 2020                   -22.8%        -17.8%          17.6%        147.0%           10.4%
 Variance % 2021 vs 2019                  -14.3%        -11.0%          -8.6%        -10.9%          -11.1%

Tenants in the Electronics category are trading exceptionally well and turnover for the category exceeds
pre-Covid-19 levels, while Food retailers have recovered well, albeit trading slightly below 2019 turnover
levels. Tenants in the Travel, Personal Health and Entertainment categories remain under pressure, and we
continue to provide Covid-19 relief to these tenants.

Our repositioning strategy is bearing fruit and we have seen an increase in interest from tenants to take up
space in our centres.

At Woodlands, we opened a new Starbucks store in April and replaced the old Game store with a new Checkers
FreshX that opened in May 2021. A new Stax store has taken up the remainder of the space vacated by Game
and will open before the end of the financial year.

Checkers have agreed to upgrade their CapeGate store to the new FreshX specification, while the MRP apparel
upgrade and expansion, coupled with the relocation of MRP Home and downsizing of the MRP Sport, had a
very positive impact on their turnovers.

Somerset Mall remains fully let and opened new stores for Superga, Fabiani, Wellness Warehouse and MRP
Sport, as well as expansions for Kingsley Heath and Crossley&Sons. The ceiling replacement project is
progressing well and should be completed towards the end of 2021.

Rosebank Mall more than halved its vacancies by securing a deal with Ignite Fitness to take over the space
occupied by the old Planet Fitness gym and a new iStore will open in the ex-TM Lewin space. The first
self-storage facility in the Hyprop portfolio and the pilot SOKO District should open at Rosebank Mall early
in the new financial year.

Hyde Park Corner continues to attract new tenants and concept stores, including The Finish Line, (new concept
offering a range of athleisure brands and the Swiss-engineered performance running shoes "ON"), Good
Gracious Frozen Food, Refillery and Lovisa. Arcifurn plans to open its new flagship showroom of handcrafted
furniture next month. We also look forward to the opening of KoL, a Japanese restaurant that will offer curated
contemporary Japanese cuisine and flexible co-working space, as well as the re-opening of Tashas following
their upgrade.

The Glen completed the installation of its generators that provide full back-up power to the mall, and
Woolworths commenced upgrading their store.

At Canal Walk Foschini has relocated to the old Forever21 premises, and the centre has secured the first Zara
store in the SA portfolio to take over the old Foschini space. Zara is due to open in the first half of 2022.

We are still experiencing negative rental reversions as well as significant increases in municipal and utility
charges, which have been partly offset by savings generated by the solar plants installed at the Gauteng malls.
Hyprop continues to focus on managing operating expenses in order to contain occupancy costs. As consumer
behaviour continues to evolve, we will continue to reposition our centres in order to navigate through these
challenges.

EASTERN EUROPE

Europe experienced a second wave of Covid-19 infections in the first quarter of the 2021 calendar year, with
significantly higher rates of new infections compared to March 2020. A multitude of lockdown measures and
restrictions were introduced by governments which impacted most of our centres significantly.

In Bulgaria, The Mall was under hard lockdown from 28 November 2020 to 31 January 2021, and again from
22 March 2021 to 16 April 2021. In Montenegro, a second lockdown was in place from 11 March to
17 April 2021, while malls were closed for four weeks in Serbia in March and April 2021. No hard lockdowns
occurred in Croatia and Macedonia. Several countries also imposed travel restrictions, the banning of public
events and sports matches, the closure of schools and universities, reduced trading hours and harsh restrictions
for restaurants. Currently, restaurants and fast food outlets are trading at limited capacity and most countries
only allow take-aways.

These lockdowns and restrictions continue to impact tenants’ operations and further rent reductions have been
granted to certain tenants to assist them. Hystead will continue to evaluate requests from tenants for rent relief
and support in the context of occupancy cost ratios.

Securing replacement tenants for the seven stores being vacated by Inditex brands in Bulgaria, Belgrade and
Montenegro has been finalised at better rental rates, as follows:

                 Number of
                   Inditex
               brands that                                                    
               gave notice                                                  New tenant         New tenants commence
 Country         to vacate            New leases signed               occupation dates                      trading
              
 Bulgaria                4                             3                   1 June 2021             One in Jul 2021;
                                                                                                   Two in Sept 2021
                                                                                       
 Serbia                  2           1 signed (Promoda),         Dan John in Aug 2021,        Dan John in Oct 2021,
                               1 to be signed (Dan John)           Promoda in Feb 2022        Promoda in March 2022
                       
 Montenegro              1                             1          Immediately occupied              1 February 2021
                                                                            by Pandora

The Covid-19 lockdowns in the region presented opportunities to accelerate the completion of capital projects
prior to the re-opening of the malls. The mall refurbishment project at Skopje City Mall has progressed well
and several phases, including the re-construction of the Café Terraces, the downsizing of Ramstore and
refurbishment of all mall toilets, have been completed. The full project should be completed in the second
quarter of 2022. The refurbishment of the Mall Sofia food court is complete and will improve the mall’s
dominance in Sofia.

The roll-out of vaccines in Europe is progressing and we are optimistic about further relaxation of restrictions,
and a recovery of footfall. It is expected that herd immunity in Europe should be reached through vaccinations
by the end of October 2021.

                              % of the total             Operating
 Country               population vaccinated                 GLA %


 Bulgaria                                25%                   97%
 Serbia                                  29%                  100%
 Montenegro                              22%                  100%
 North Macedonia                         12%                   97%
 Croatia                                 38%                   98%

Most of the non-operating GLA relates to restaurants and cafes that have no outside terraces or seating and
therefore can not trade.

The difficult trading environment has put pressure on tenant turnovers and foot counts remain low due to
lockdown restrictions. Vacancies have been well managed and remain below 1%. Cash collections are being
closely monitored.

                                                                                         Total for 4-
 Trading metric                Year           Jan         Feb         Mar        Apr     month period
                                                                                        
 Turnover (€'000)              2019        48 967      40 951      49 026     50 583          189 527
                               2020        50 670      45 108      25 118      6 369          127 266
                               2021        39 815      40 667      35 292     38 255          154 030
 Variance % 2021 vs 2020                   -21.4%       -9.8%       40.5%     500.6%            21.0%
 Variance % 2021 vs 2019                   -18.7%       -0.7%      -28.0%     -24.4%           -18.7%

 Trading Density (€)           2019           235         197         234        242              227
                               2020           238         212         120        168              185
                               2021           230         190         165        178              191
 Variance % 2021 vs 2020                    -3.4%      -10.4%       37.5%       6.0%             3.2%
 Variance % 2021 vs 2019                    -2.1%       -3.6%      -29.5%     -26.5%           -15.9%

 Foot count ('000)             2019         3 618       3 232       3 588      3 589           14 028
                               2020         3 611       3 372       1 785        433            9 201
                               2021         2 405       2 500       2 161      2 202            9 267
 Variance % 2021 vs 2020                   -33.4%      -25.9%       21.1%     408.5%             0.7%
 Variance % 2021 vs 2019                   -33.5%      -22.7%      -39.8%     -38.6%           -33.9%

 % Vacancy                     2019          0.2%        0.2%        0.0%       0.1%                -
                               2020          0.2%        0.1%        0.3%       0.5%                -
                               2021          0.3%        0.9%        0.8%       0.4%                -
 Collections (€'000)           2019         9 987       9 011       8 641      9 167           36 806
                               2020        10 750       9 301       6 380      2 228           28 660
                               2021         7 423       8 010       8 502      6 498           30 434
 Variance % 2021 vs 2020                   -31.0%      -13.9%       33.3%     191.6%             6.2%
 Variance % 2021 vs 2019                   -25.7%      -11.1%       -1.6%     -29.1%           -17.3%

SUB-SAHARAN AFRICA (EXCLUDING SOUTH AFRICA)

In Nigeria, all tenants are allowed to trade without restrictions, other than cinemas and restaurants which are
allowed to trade at 33% and 50% capacity, respectively. These restrictions, together with a general
risk-aversion due to the Covid-19 pandemic, subdued trading somewhat. Exchange rate weakness necessitated
negative rental reversions on expiry of some leases. The space vacated by Mr Price in March 2021 was let to
Dune and Hamley’s. Despite Ikeja City Mall being highly cash generative, the severe US dollar liquidity
shortage persists in Nigeria, making it difficult for tenants to import stock and for the mall to repatriate profits
to its shareholders.

The second round of Covid-19 vaccines is being rolled out in Ghana, and current infection rates show a
substantial decline. Cinemas and pubs in Ghana are not allowed to trade, although there are indications that
these restrictions might be relaxed from July 2021. The bulk of the Covid-19 concessions to tenants have been
processed, placing pressure on rental income. Turnover in Cedi for the Ghana portfolio declined marginally
for the months of January to March 2021, compared to the previous year (pre Covid-19 lockdowns). However,
for the four months January to April 2021 turnover increased by 16.3% (+12.1% in US$) compared to the
previous year, due to the low base in April 2020 (the first month of lockdown). Trading density grew by 18.5%
in Cedi (+16.0% in US$) for the four months January to April 2021 compared to the previous year.

Total foot count for all four malls increased by 8.5% for the period January to April 2021 compared to the
previous year, despite the trading limitations imposed on restaurants and cinemas. Monthly foot count is
recovering but is still below pre-Covid-19 levels.

Vacancies have improved across the Africa portfolio, from 12.8% in April 2020 to 11.7% in April 2021,
despite the challenging operating environment, with Ikeja City Mall remaining fully occupied.

                                                                                          Total for 4 -
 Trading metric                     Year         Jan        Feb        Mar        Apr      month period
                                                                                          
 Turnover (excluding Ikeja)         2019      45 202     40 428     45 886     47 482           178 998
 (GHC'000)                          2020      44 978     40 810     45 324     24 085           155 196
                                    2021      45 694     42 291     46 907     45 589           180 481
 Variance % 2021 vs 2020                        1.6%       3.6%       3.5%      89.3%             16.3%
 Variance % 2021 vs 2019                        1.1%       4.6%       2.2%      -4.0%              0.8%

 Turnover (excluding Ikeja)         2019       9 016      7 575      8 359      9 273            34 223
 (USD'000)                          2020       7 986      7 465      8 003      4 161            27 616
                                    2021       7 771      7 267      8 092      7 817            30 948
 Variance % 2021 vs 2020                       -2.7%      -2.6%       1.1%      87.9%             12.1%
 Variance % 2021 vs 2019                      -13.8%      -4.1%      -3.2%     -15.7%             -9.6%

 Trading Density (excluding         2019         959        881        924        957               930
 Ikeja) (GHC)                       2020       1 064        956      1 390        758             1 042
                                    2021       1 309      1 185      1 210      1 234             1 235
 Variance % 2021 vs 2020                       23.0%      24.0%     -12.9%      62.8%             18.5%
 Variance % 2021 vs 2019                       36.5%      34.5%      31.0%      28.9%             32.8%
 Trading Density (excluding         2019         193        170        184        188               184
 Ikeja) (USD)                       2020         189        175        245        131               185
                                    2021         223        204        220        212               215
 Variance % 2021 vs 2020                       18.0%      16.6%     -10.2%      61.8%             16.2%
 Variance % 2021 vs 2019                       15.5%      20.0%      19.6%      12.8%             16.8%

 Foot count (including Ikeja)       2019       2 258      1 836      2 176      2 315             8 585
 ('000)                             2020       2 226      1 862      1 844      1 123             7 056
                                    2021       2 142      1 782      1 907      1 825             7 657
 Variance % 2021 vs 2020                       -3.8%      -4.3%       3.4%      62.5%              8.5%
 Variance % 2021 vs 2019                       -5.1%      -2.9%     -12.4%     -21.2%            -10.8%

 % Vacancy (including Ikeja)        2019        9.8%      10.1%      10.7%      10.5%                 -
                                    2020       12.2%      12.7%      12.9%      12.8%                 -
                                    2021       11.0%      11.1%      11.6%      11.7%                 -

 Collections (including Ikeja)      2019       4 139      3 044      3 237      3 647            14 067
 ($'000)                            2020       3 826      3 252      2 941      2 331            12 350
                                    2021       3 083      2 958      3 437      2 866            12 344
 Variance % 2021 vs 2020                      -19.4%      -9.0%      16.9%      22.9%              0.0%
 Variance % 2021 vs 2019                      -25.5%      -2.8%       6.2%     -21.4%            -12.2%

IN CLOSING

Hyprop remains committed to creating safe environments and opportunities for people to connect and have
authentic and meaningful experiences, by owning and managing dominant retail centres in mixed-use precincts
in key economic nodes in South Africa and Eastern Europe.

In addition to driving the Group’s key priorities of repositioning the SA portfolio, increasing the dominance
of the properties in the South-Eastern European portfolio, pursuing the non-tangible asset strategy and
strengthening the balance sheet and preserving cash, the Group is also engaged in negotiations regarding the
Hystead shareholders agreement and Hystead’s future capital/funding structure.

Hyprop’s results for the year ended 30 June 2021 are scheduled to be released on 2 September 2021.

Hyprop will hold a virtual group meeting at 14:00 this afternoon to discuss this operational update. Please
contact Lizelle du Toit at lizelle@hyprop.co.za or on 082 465 1244 should you wish to join the meeting. A
recording of the meeting, as well as a copy of the presentation, will be available on Hyprop’s website
thereafter.

9 June 2021


Sponsor
Java Capital

Date: 09-06-2021 01:00:00
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