Blue chip shopping centre owner Hyprop Investments needs to reassure investors about its European and African strategies given the pressure the domestic portfolio faces.
Over the past few years, the company has expanded into Ghana, Zambia and Nigeria in Africa through joint ventures. It has also bought assets in the southern European countries of Serbia, Montenegro, Macedonia and most recently, Bulgaria as a part of the joint venture Hystead. But fund managers have been critical of a lack of disclosure about these offshore strategies.
"Hyprop has decided to dilute its South African portfolio, one of the highest quality portfolios in the sector, with investments in some peripheral economies.
"Their disclosure on offshore structures is lacking. Their offshore investments seem highly geared, so if there is an improvement or deterioration in these markets, it will have an amplified effect on valuation," said Evan Robins, listed property manager of Old Mutual Investment group's MacroSolutions.
In SA, Hyprop, which is one of the larger real estate stocks on the JSE with a market capitalisation of R29.47bn, has been challenged with filling space left by department store group Stuttafords, which is shutting down after 159 years. Stuttafords occupied 11,000m2
of gross lettable space at three of Hyprop's shopping malls; Mall of Rosebank, Clearwater Mall and Canal Walk.
Hyprop CEO Pieter Prinsloo said it could take up to six months to negotiate leases for the Stuttafords vacancies.
A flat-lining South African economy has prompted property companies to invest in eastern Europe where interest rates were low, said Zayd Sulaiman, a portfolio manager at Catalyst Fund Managers.
"They have been managing their capital well, but we as investors need more on their east European strategy," he said.
Hyprop recently invested in a centre in Sofia, Bulgaria, but some analysts are concerned it may have overpaid for the asset given the lack of detail that has been released about the deal.
Gaining full insight of The Mall acquisition by Hystead in Sofia was difficult, as the yield at which the deal has been done has not been disclosed. The price was towards the higher price bracket for the region, but not having the full particulars hampers the ability to judge the deal, said Garreth Elston of Golden Section Capital.Source: Business Day