SA mall owner Hyprop looking to sell underperforming malls in West Africa

SA mall owner Hyprop Investments, which has 54,569m² of exposure to struggling SA retailer Edcon, is still looking to sell its underperforming malls in Ghana and Nigeria. The company has stakes in Accra Mall, West Hills Mall and Kumasi City Mall in Ghana, and Ikeja City Mall in Lagos, Nigeria.

Hyprop has been seeking to divest its sub Saharan African assets outside South Africa (Hyprop also owns assets in Eastern Europe) for some time. Hyprop will seek to focus on South Africa and Eastern Europe – both areas which have seen rising trading densities. Hyprop co-owns retail assets in Bulgaria, Croatia, Serbia, Montenegro and North Macedonia. In contrast to Eastern Europe especially, Hyprop has been highlighting poor performance in Ghana and Nigeria since mid 2018.

For its financial year to June 2019, the group took a R1.45bn ($93.1m) impairment on its non-SA African assets: interests in Accra Mall and West Hills Mall in Accra, Kumasi City Mall in Kumasi, Ghana (via Hyprop’s 37.5% stake in AttAfrica); and a 75% interest in Ikeja City Mall in Lagos, Nigeria. Hyprop sold its stake the Achimota Retail Centre in Accra in June 2019. It sold its stake in the Manda Hill Shopping Centre in Lusaka, Zambia, to Growthpoint Investec African Properties (Giap) in August 2019.

Hyprop has taken a hit from its exposure to Edcon. At the end of June 2019, Edcon accounted for 7.6% of Hyprop’s total gross income and 9.4% of Hyprop’s gross leasable area (GLA). Since then the company has reduced its Edcon exposure from 66,781 m² in December 2018 to 57,145m² at the end of June 2019 to 54,569m² today.

Edcon came close to failing in 2019: in May 2019, Edcon CEO Grant Pattison successfully oversaw the R2.7bn ($173m) refinancing of Edcon’s debt to keep the retailer afloat. In February 2020 the company sold 167 CNA stores (its stationery business). The company is currently in a turnaround plan that is seeing it ask landlords for rent reductions.

It is perhaps telling that for almost 9 months Hyprop has been unable to sell its West Africa malls. The culprit is a familiar one: currency devaluation. Despite positive economic growth, its West Africa assets cannot convert performance back into a net positive rand contribution. This is the same issue that has dogged Shoprite in both Nigeria and Angola, and which may ultimately lead the South African supermarket chain to exit some of its country markets.