Industry News: Hyprop, African Sun, Investec Property Fund

Hyprop Investment Results

One of the savvier retail-focused Real Estate Investment Trusts (REIT) in SA has come out with its result for the year ended 30 June 2020. A major revision to the strategy that they came with not long ago was to preserve cash and strengthen their balance sheet, especially by reducing debt. Part of this strategy involves Hystead not declaring any dividends, which will save funds to pay for a portion of their Euro-denominated debt. They are also looking to sell Ikeja City Mall and use the proceeds to settle $18 million of outstanding Dollar debt with the rest being funnelled to local debt. They will, in addition, dispose of selected SA assets to help settle some local debt. Hyprop’s revised strategy wants to reposition them in SA, and strengthen its European property portfolio.

Performance-wise, the company achieved a net operating income of R1.27 billion, with a basic loss per share of R13.32 (from R0.65 in the previous year), and Headline Earnings per Share standing at 410.7 cents – a 45.6% increase from the previous year. One of the more important figures in property, being net asset value (per share) fared well, the company’s net asset value stood at R19.3 billion (R76.09 per share), with R835 million in cash and an unused revolving credit facility – cementing a strong liquidity position. The company stated that the impact of Covid-19 reduced distributable income by R434 million. The payment of the interim, and declaration of the final dividend have both been deferred to December 2020.

African Sun Looking to Buy Dawn Properties

African Sun wanting to buy Dawn sounds like the most natural thing if you stop thinking about them as a company, and just think of them as the natural phenomena they are. Swinging back to the corporate side, it is a great deal to be honest. The timing is particularly important, as we have seen that property is not doing very well in the Covid-19 era. Arden Capital (who holds 57.67% in African Sun and 66.81% in Dawn, and will hold 61.81% in African Sun after the acquisition) laid out that the consolidation “will create a robust balance sheet, with enhanced financial leverage for unlocking future developmental capital for the combined business to survive the Covid-19 downturn, protect jobs, as well as guarantee a future for the business and its stakeholders”.

Shared costs and improved efficiencies are among some of the more trivially expected synergies, especially in terms of compliance costs of having two listings of basically the same business. The transaction will likely be a share purchase structured to exchange 1 African Sun share for every 3.988 ordinary shares of Dawn. Dawn will delist from the Zimbabwe Stock Exchange after the transaction. Approval of the transaction from the African Sun shareholders is expected on 13 October 2020, and then the subsequent approval of regulatory bodies.

Investec Property Fund Dropping Belgium Properties

Back in December 2019, Investec Property Fund announced their intention to buy two Belgian logistics properties as part of their Pan-European Logistics (PEL) strategy, with the intention of transferring the properties into the PEL platform once they had refinanced the debt in the platform. On 22 September 2020, the Fund reached an agreement to transfer the properties into the PEL platform at the Fund’s acquisition cost of €70.7 million. Proceeds from the disposal will go toward reducing the Fund’s Loan-to-value ratio – basically paying off loans. In addition, the Fund will sell 10% of its stake in the PEL platform for about €40 million, leaving them with a stake of 65%. This sale is also part of the Fund’s de-gearing strategy as proceeds from the sale will go toward paying off a Euro-denominated debt facility.

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Author: Nkanyiso Nyawose

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