Hyprop Investments Limited (HYP.JO) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Hyprop's interim results presentation for December 2020. I want to put out a warm welcome to all the directors that joined us today as well as our shareholders, investors, analysts. And in a special word of welcome to all our staff that's joined today. I know it's been difficult times, and we've been working quite hard. And I just want to say thank you very much for the hard effort for the last 6 months. It's been really appreciated. In terms of the agenda, we will be looking at the highlights headlines and the key matrixes. I'll give an update on South Africa. Then I will pass over to Rabia to give us an update on the performance of Europe, specifically Hystead. Wilhelm will give us an update on sub-Sahara Africa, and Brett on the financials of the company, and I will end with the closing. We have made very good progress implementing our revised strategy. One thing COVID has taught us is we, as human beings, are social beings that like to interact and be together. And therefore, it supports our purpose of creating safe environments and opportunities for people to connect and have authentic and meaningful experiences. The impact of COVID is real. The financial impact on our business in total since the pandemic has started, has been ZAR 750 million and that was in the form of rent relief. No dividends from Hystead, Hystead obviously also impacted by COVID, reduction in marketing and parking income and higher expenses for the required protocols we need to implement. One of the key things we've been driving at Hyprop was to strengthen our balance sheet. We have successfully settled all our dollar equity debt on the balance sheet. We reduced our total borrowings by ZAR 942 million. And then we also have retained ZAR 777 million of our dividend through the DRIP, a successful DRIP, where 82% of our shareholders participated in that. I want to say thank you for that. We have successfully reduced our LTV from 41.4% to 38.8%. And we had a reduction on our distributable income, mainly driven by COVID. The total impact for COVID was ZAR 244 million, of which ZAR 112 million was due to rental discounts, ZAR 113 million reduction in dividends from Hystead and ZAR 19 million from the reduction of parking and marketing income. We have successfully agreed the terms for the disposal of Atterbury Value Mart, and hopefully that will be implemented in the next few months. We have completed the installation of the solar of Phase 1 on our Gauteng malls. And we have had some reduction in -- of savings on some of our expenses. We reduced that by 3.8%. The rand amount is about ZAR 2.4 million per annum, and that's mainly due to revised service level agreements with our service providers. In Europe, as you know, the year-end for Hystead is December, and as of June, we used the previous year's valuations in our final results. This year, we had an independent valuation done on that portfolio, and it has reduced by 4.4%, a total of EUR 35.6 million. We have successfully completed the food upgrade at Mall of Sofia, and we have made quite good progress with completing the redevelopment of Skopje City Mall. And the implementation of the sale of Ikeja is still ongoing, and Wilhelm will give us some further feedback in terms of that. We have agreed terms with EmpiriQ on a new innovation JV. The innovation JV will focus on technology-driven initiatives, and we're looking forward to this new initiative. The next slide, we're going to look at our key metrics. As a group, our key objectives has been to ensure we have a healthy balance sheet. We want to reset the income to a sustainable base and we want to focus on total return in the long term. Distributable income for the 6 months was ZAR 473 million. Compared to December 2017 (sic) [ 2019 ], the distributable income has reduced mainly by the ZAR 244 million due to the direct impact of COVID, ZAR 42 million as an indirect impact by COVID, and then ZAR 97 million for rent reversions as well as higher interest costs due to the fact that we converted some of our dollar equity debt into rand debt. Our loan-to-value, the all groups, all the banks are measuring the loan-to-value on the same principle now, and our see-through LTV has reduced to 38.8%. Our group LTV covenant is 50%, that means we've got headroom of more than 10% with our current LTV. If we use the SA REIT's best practice recommendation, our LTV is only 24.4%. Brett will give a little bit of more feedback in terms of the strategy around our debt. Our cash ICR is still healthy at 3.8x, and our IFRS ICR is 2.57x. On our balance sheet, there was a lot of hard currency debt before. We've successfully repaid all the dollar equity debt, and the next focus area is going to be reducing our euro equity debt. The net asset value per share has reduced to ZAR 74 per share. The main driver for that is the impairment on our asset portfolio in June as well as December, which was a total reduction in the value of about ZAR 4.2 billion. Also, the impairment of our Hystead assets during the interim -- during this interim results presentation. Need to issue a further 40 million shares was required for the DRIP that was implemented, that has reduced the NAV per share to a further ZAR 66 per share. And if we look at the current share price, it's still trading at 50% below the reduced NAV per share. Still the engine room of the business. 59% of the investment properties is located in South Africa. We're currently getting 99% of our distributable income from South Africa. That is a bit skewed given the fact that we're not really receiving so much from Hystead as well as Africa at this point in time, mainly due to COVID. In terms of footfall, that's the graph on the top left-hand side, you can see there when the hard lockdown happened in April, there was quite a big drop in our foot count, and that has gradually picked up. If we look at a reporting period, our foot count is still down 20.2% compared to 2019. What is positive to say, although the customers are coming less, the spend per head is much more, and that's indicated with the blue dots on the slide. And as you could see, our spend per head is higher for 2020 than 2019. Trading density, that's the graph on the top right-hand side. What is very positive to see a lot of the initiatives for the repositioning was starting to work in terms of increase in trading densities up to February, and unfortunately, with the lockdown, that has reduced substantially. For the reporting period, our trading density is down 7.4% compared to the previous year. On a year-to-year basis, we have seen at least some positive growth in trading densities on 3 of our shopping centers, namely The Glen, it increased by 0.1%; Woodlands by 0.4%; and then Atterbury Value Mart has increased by 6.5%. One of the malls that has been impacted with COVID is Rosebank Mall, given the fact that a lot of the offices and hotels in the surrounding area is not fully operational as yet. If we look at specific categories that has been doing well, we had a positive growth in trading densities of 17.5% from electronics, photography and music, 2.7% in home furnishing, Art and decor; and 0.7% increase in specialty stores. The total revenue has took a big drop, and you can see that on the graph on the bottom left-hand side. And the total impact on our SA portfolio of COVID since the pandemic has started was ZAR 450 million, ZAR 300 million up to June and a further ZAR 150 million for the last 6 months. The graph on the bottom right-hand side shows our collections, which we started net receivables of ZAR 130 million at the end of June 2020. During the 6 months, we have invoiced a total of ZAR 1.7 billion for collections. We received 105% up to December, and we ended up with net receivables of ZAR 50 million. Our vacancy on our portfolio is the highest ever, it's up to 3%. I think it's still low compared to some of our peers. But what vacancy does do is it creates the opportunity to repurpose for new uses and secure differentiating tenants. We have given the teams the mandates to make sure we retain our tenants and we retain functional malls. Arrears has decreased by ZAR 30 million. At the end of June, it was ZAR 137 million, and now it's reduced to ZAR 107 million. Changing with the times. One of the initiatives in the nontangible asset strategy is SOKO District. SOKO District, what we have realized, a lot of the online retailers has come to the realization that customers like to touch and feel their products. And we have seen this trend where your online retailers are taking up some physical space, for example, Yuppiechef and Amazon. But the barriers for entry is quite high getting into the physical space. Firstly, you've got a lot of TI cost to fit-out the store, then you have to sign a long-term lease and give some financial commitments in terms of a deposit or some guarantees. And then the third thing is, a lot of times you wouldn't know whether you're going to have a successful store or not. What we are developing is a online technology platform whereby the online retailer can get access to the physical space on a flexible basis and not a lot of capital commitment. Plus it's matching the retailer product and the shopper across our portfolio. The first district will be launched at Rosebank in June 2021. Some of the online retailers we have secured to date is Dokter and Misses, it's a furniture retailer; an online pet shop, namely Benji + Moon, and The Joinery, that makes end products from recycled goods. To improve our foot count and create community centers, we are busy with a number of initiatives. What we do with a lot of these initiatives, we will run a pilot. And if it's successful, the idea is to roll it out on the rest of the portfolio. One of these initiatives is Pargo, where we have created 2 collection points at 2 of our malls, namely The Glen as well as Canal Walk. And what is very positive is to see that these collections are slowly but surely increasing. A lot of the products that's being collected is not products that's available in the mall. So effectively, we are broadening our customers' choice without increasing any of the lettable space. One of the other initiatives is Parkupp. Parkupp is a new application whereby you can get access to flexible parking space, and we're running a pilot at Canal Walk as well as Rosebank Mall. Self-storage, a lot of the unutilized space within our parking as well as shopping centers, we are looking to convert that into self-storage. We have identified 4 sites where we want to implement self-storage, namely Rosebank Mall, Clearwater Mall, The Glen and Canal Walk. We got the help of an expert involved to identify how these layouts needs to do -- look like and what we need to do to make it quite a feasible project. What's quite attractive about self storage, the amount of capital you need to spend is not that much, and it actually gives quite good returns given you've got sufficient utilization of the self storage. The first one we will launch is at Rosebank Mall and that will open sometime in June. In terms of tenant picks, we have been working quite hard to make sure we've got the right anchors in our malls. We have successfully secured Checkers as an anchor at The Glen, Rosebank Mall, and we're busy converting the old Game store at Woodlands into a Checkers plus a Stax. One of the things that is a reality is that cookie-cutter tenant mix is something of the past. You need to ensure you understand your customer and we meet -- and that you need to understand, you understand the customer and your demographics, and that is reflected in your tenant mix. One of the tenants we have secured at Hyde Park Corner is Tshepo Jeans, they've got a social following of more than 65,000 people. And what is very good about bringing that type of tenant into your shopping center is, obviously they've got a certain association with that brand, and it attracts people into the shopping center. That is something similar we're going to have when we start bringing in the online retailers in the SOKO district. In terms of the Golden Thread, we want to create a unique customer experience in our SA portfolio initially. That is going to be focused around 3 things; namely the place, the brand as well as your people. In terms of place, how you experience when you arrive at our malls, how we use our common areas as well as our kiosks. And then in terms of the brand endorser, linking the Hyprop brand with our malls, and then the people aspect where we actually want to just give fantastic customer service to our people visiting our malls and that's getting really back to basics. In terms of new tenants, we've secured quite a number of new tenants during the last 6 months. As I mentioned, we secured Checkers, specifically converting the old Game store at Woodlands with Checkers and FreshX. We also have secured the first Zara at Canal Walk, that will be the first one in the Hyprop portfolio. We've opened a new baking school for Just Teddy at Hyde Park. And then we've opened Toys "R" Us and Baby "R" Us at Somerset Mall. We have opened the first Starbucks at -- in the Western Cape at Canal Walk, and we will be opening a Starbucks at Woodlands later this year. Solar, as I said, we have completed the installation of our solar on our 6 Gauteng malls. Up and above getting a fantastic return from these solar projects even before the electricity increase, we do see a big benefit from an environmental perspective. If you just take the 6 malls, we have completed the amount of electricity we save on an annual basis on these 12-- on these 6 malls is 12.9%. Now given the fact that Eskom doesn't have to generate that electricity, the potential saving on the Eskom side is about 20,000 kiloliters of water and 8,102 tonnes of coal. We also reduced CO2 emissions of about 14,975 tonnes. And to convert that CO2 to oxygen, you will actually need 90,000 trees. So effectively, indirectly, we're saving 90,000 trees as well. We're currently investigating the possibility of rolling out [ PV ] in the Western Cape as well as on the Hystead portfolio. Propelair toilets, we have successfully installed Propelair toilets at Clearwater Mall, we have installed 47 toilets. The saving from a water perspective is 60% to 70% per toilet, and that gives us a payback period on those toilets within or just over 15 months. We installed an IBC solution at Canal Walk. The unit was installed in November 2020. It converts wet food waste as well as cardboard into compost. And up to date, we have converted 78% in cubic meters of wet food waste. I want to hand over now to Rabia to give us an update on the performance of Hystead. Thank you.

Good morning, everybody. Before going to the slides, I would like to update you on the current COVID restrictions enacted by the governments in the region Hystead operates in. In Bulgaria, second lockdown has been in place from the 28th of November up to January 31. On February 1, the food court can operate for takeaways only without any seating area. In Macedonia, from January 21 onwards, restaurants may trade until 9:00 p.m. with limited indoor capacity of 30% and no more than 4 people at the table. In Montenegro, as of December 9, the trading hours may not exceed 6:00 p.m. From 18 February, all restaurant [ into phase ] are closed. In Croatia, since December, there is a restriction of 1 shopper per 16 square meters in a center. All restaurants and cafes and casinos are closed. While in Serbia, shopping centers were not allowed to trade during the weekend. And currently, all business can trade for limited trading hours during the week, up to 8:00 p.m. These restrictions aim to prevent the spread of the virus, but also keep adding more pressure on the shopping center performance, reflected mainly in lower footfall and lower turnover. And yet, we are still providing assistance to some tenants on a monthly basis in the form of rent reductions based on effort ratios results. However, with the vaccine and immunization efforts being rolled out in Europe, the market expects to avoid third wave of the virus and to move towards more stabilized environment in the near future. Having said that, the 2020 trading overview looks as such. While the beginning of 2020 showed an improved like-for-like performance, the lockdowns and the continuous trading restrictions reversed this trend. Looking at the graphs, we can see the good start of 2020, then a sharp decline in March due to the first wave, followed by improving trend after reopening in May, June, and again, decline trends started in October, marking the beginning of the second wave. The footfall recorded a notable decline of [ 34 ]% from January to December. The current trend beyond December shows improvement, but not yet full recovery. With the opening of the mall in Sofia after the second lockdown and the start of the vaccination across the region, we do see positive change. The spend per head increased by 13% on average for the full year, and by 14% for the 6 months to December 2020. As for the trading density, we started 2020 with slightly better ratios than similar month year before. However, due to the lockdown, the trading density for shops that could trade declined by 18% on average for the 6 months and 19% for the 12 month ending December. If we look at revenues, the lockdown and the restricted measures enacted by the governments certainly affected our income stream. We did not charge rent for the shops which could not trade. And after the reopening, we provided and still providing continuous assistance to tenants with poor performance to keep their businesses function. As a result, the forfeited revenues for rent, parking and marketing income is EUR 6.9 million for the last 6 months of 2020 and EUR 17.8 million since the beginning of the pandemic to December 2020. On the collection side, we still exercise enhanced efforts to strengthen as much as we can our cash balance during the pandemic, with the aim to bring it back to the same level prior to COVID. Evidence for our effort is that in the last 6 months of 2020, Hystead portfolio reduced its total outstanding debt by EUR 1 million compared to the end of June 2020. The reliefs granted to tenants due to COVID amounts to EUR 3.4 million. Most significant part was provided in Sofia. In all locations, the collection was higher than the monthly invoiced amount, with the only exception of Sofia due to the second lockdown, which started in November in Bulgaria. Overall, the collection in the period has been affected by several factors driven by the pandemic. However, the general trend is improving collection rates and stabilizing areas. Moving to the next slide, the valuation page. Generally speaking, prior to COVID, the retail market was characterized as stable market and enjoyed healthy economic conditions. This led to a steady increase in the fair market values of our properties across the region from EUR 772 million to EUR 804 million in 2019. The increase was purely driven by effective asset and property management initiatives of the Hystead team. During COVID and due to government restrictions, we had to put some temporary measures to support our tenants, which resulted in a decrease in the net operating income, and thus negatively affecting our property valuation. As a result, the valuation decreased by 4.4% from EUR 804 million to EUR 768 million. This decrease was predominantly driven by rent reductions, rent-free period, longer voids and lower turnover [ fee ]. The impact on the valuation was further worsened with epidemic changing investors' short-term perception on the retail industry and its risk. Yields has softened. We note that the cap rates and the discount rates moved up by 25 basis points in 2020 compared to 2019. From what is evident so far and without underestimating the uncertainties from the pandemic, it is ours and the experts' expectation that with the rolling of the vaccine in the next few months, the retail market is expected to show a normalization somewhere in 2020 (sic), stressing out that temporary rental decrease does not form a permanent trend in the market. All valuations were done based on the discounted cash flow projected over a period of 10 years. Now moving to the development projects. This is relevant for the next 4 slides. During the past 2 years, we have spent over EUR 7 million on CapEx to reinforce the shopping malls' position in the market and keep them relevant, mainly to speak to new market trends and also remain strong and valid when it comes to the existing or new competitors. In Sofia, Slide 15 and 16, after successfully adding 9,000 square meters of GLA to the mix, including a new hypermarket and upgrading the parking, we have just completed the refurbishment of the food court for a total cost of EUR 1.1 million. It includes new modern interior design, new tiles, repositioning of the shops and new furniture. The refurbishment has also increased the seatings area from 700 to 1,100 seats in the common area. In Skopje, Slide 17 and 18. We are halfway through our project in total of EUR 6.2 million, which includes acquiring small adjacent land, upgrade of outside terraces, including landscapes, kids' playground, rightsizing and relocation of various tenants and reducing new brands, upgrading the common areas, toilets at the food courts, improving the traffic flow by placing additional escalators and new entrances. The project is expected to be completed by Q4 of this year. In Belgrade, we are about to start retiring of the common area on the ground floor. We are also looking at yielding projects for our malls in Podgorica and Zagreb. Next slide, leasing activities, Slide 18. During the 12 months ended December 2020, we managed to secure many new brands entering our portfolio, with the majority being in the fashion category. Skopje City Mall had the most newcomers entering the Macedonian market due to our 2 years project. In total, we have concluded 149 new listings. Our renewals and our weighted average overall retail decrease of 9%. New letting were secured on 3,950 square meters and leases over 5,800 square meters were renewed during 2020. The average contractual expiration achieved was 1.2% and the vacancy at the end of December stood at 0.4%. In this slide, you can see some of the newcomers to our portfolio in the region. That's all from my side. I will hand it now to Wilhelm for the sub-Saharan African section. Thank you.

Thanks, Rabia, and good morning, everyone. 2020 was a landmark year in world history, with no country escaping COVID's impact. The African countries in our portfolio are no exception, but they have certain unique challenges. Firstly, the liquidity constraints in the Nigerian foreign exchange market persisted throughout 2020. Hence, no U.S. dollars were repatriated to South Africa. Accordingly, we didn't include any distributable income from Ikeja in 2020. Secondly, although not COVID-related, violent protests erupted in Lagos during October. Fortunately, Ikeja City Mall was not damaged. But it was forced to close for a few days. Certain competing malls, however, were less fortunate and were damaged during the riots. The strategy with the Africa assets is twofold: firstly, to exit; and secondly, to protect value in the interim. I'll briefly touch on the operating performance, what we are doing to protect value and comment on the disposal process, starting with the operating performance. In general, trading conditions in Ghana and Nigeria remained challenging throughout the period, despite these countries' responses to the COVID virus having been less draconian than in South Africa. As you can see from the graph top left, foot count in 2020 tracked below that of 2019, unsurprisingly, since COVID started. But the gap started to narrow in the last quarter to end the year down just under 10%. All tenants in the Africa portfolio are now allowed to trade, other than cinemas and pubs in Ghana. In Nigeria, cinemas are allowed to trade at 33% capacity and restaurants at 50% capacity. Despite the lower foot count, trading density in Ghana was actually higher in 2020 than in 2019 for most of the year, recovering to double-digit growth in the last quarter, which is very good. This is indicative of people visiting less frequently, but when they do visit, they tend to make the visits worthwhile. Nigeria is obviously excluded from trading density figures as they don't report turnover in Nigeria. Collections declined substantially during the peak of lockdown, but have since recovered fortunately to 99% in December, which is a huge improvement. Despite the recovery in collections, the increase in arrears is receiving focused attention. Ikeja City Mall remains fully let, which is remarkable in the current environment. And vacancies have reduced in the Ghana portfolio. As we've disclosed in the results leaflet, month-on-month vacancies are showing a steady improvement during the year to end December at 11.4%. As communicated before, it's our strategy to exit Africa. However, we are obligated to protect value in the interim. Since the June results announcement, we've completed certain interventions that were in the priorities bucket before, but these have now moved to the completed bucket. 4 of the more pertinent interventions include firstly, refinancing all 4 of the African assets totaling USD 148 million at lower margins than before, resulting in a saving of USD 404,000 to the AttAfrica shareholders. This debt has no recourse to the Hyprop balance sheet other than an interest guarantee on 1 of the 4 loans. Secondly, the equity capital in AttAfrica was also restructured during the period, resulting in an annual saving of just under USD 100,000, bringing the total annual saving to AttAfrica shareholders to just over USD 500,000. Thirdly, we've renewed the game lease at Accra Mall for another 5.5 years, which bodes well for the stability of the portfolio. In addition, certain long outstanding VAT amounts were recovered which has been a real journey. This reduces the capital required from shareholders. Our current priorities include firstly, adding more local asset management capabilities in Ghana as we haven't been able to travel to Ghana for a year, and the current travel situation is likely to be complicated for a while. Secondly, as before, relentless cash flow management and collections; and thirdly, sourcing more local tenants as a result of the departure of many South African retailers during the past 2 years. After the sale of Ikeja, we will have more than halved our effective exposure to sub-Saharan Africa, as you can see on the top graph. The remaining exposure is attributable to our interest in AttAfrica. Looking at the bottom graph, we've managed to reduce our U.S. dollar debt by almost $300 million to $57 million currently. This $57 million is entirely attributable to Ikeja, which is consolidated onto our balance sheet. After the sale of Ikeja, we will have no more U.S. dollar debt on the Hyprop balance sheet. Turning to the sales process. On 9 November, we announced an agreement to sell our 75% interest in Ikeja City Mall to 2 Actis funds. The transaction remains subject to the fulfillment of several CPs, including fundraising requirements. Given the U.S. dollar liquidity situation or lack thereof in Nigeria, fulfilling this condition is taking longer than anticipated. However, the parties remain committed to the transaction and are working to fulfilling the CPs and/or finding alternative ways to implement the transaction. We're still in discussions with several parties regarding the Ghana portfolio and we'll update you when there's something concrete to report. In conclusion, we've made huge strides in restructuring the capital structures, the management structures and shareholding structures in the African entities to save costs and allow for greater focus on the core operations. This will stand us in good stead when negotiating an exit. With that, I'll hand you over to Brett now for the financial report.

Thanks, Wilhelm, and good morning to everyone. Despite COVID-19, the last 6 months have been less volatile than the 6 months from January to June 2020. Business has focused on what was needed to get through the pandemic intact. Major economic and financial risks for the group subsided particularly as the rand strengthened against the euro and the dollar. While the environment may have been less volatile, it certainly was not easier for the vast majority of businesses and certainly our tenants. From a Hyprop perspective, we have already started various initiatives to reduce our gearing levels prior to COVID-19. If anything, these initiatives have gathered pace and momentum during the 6-month period. My presentation today will focus on how we are managing the group's debt. As part of our effort to improve our financial reporting, we have included the BPR ratios at the back of the results publication. I look forward to the questions and debates around these ratios. Distributable income for the period was ZAR 473 million, that's 45% lower than the 6 months ended December 31, 2019, pre-COVID. We have quantified the impact of COVID-19 for the last 6 months at ZAR 244 million. Most of this is in direct revenue losses, ZAR 123 million in SA from July to December 2020, EUR 18 million in Eastern Europe for the 2020 calendar year, and a much lower ZAR 8 million in Nigeria from July to December. Added to this, we have also experienced reductions in marketing income and turnover-related rentals. Our provisions for expected credit losses have been increased given the economic climate and the heightened risk of business failures. Despite a relatively good performance, the Ikeja City Mall has not been able to remit any income to its shareholders since January 2020. We have, therefore, not included any income from Ikeja in the distributable income for the period. Similarly, there was no interest received or recognized from AttAfrica. On a more positive note, distributable income from the SA portfolio actually increased from ZAR 452 million in the 6 months January to June 2020 to ZAR 470 million from July to December. For the group, distributable income increased 18% from ZAR 402 million to ZAR 473 million in the 2 6-month periods. Hopefully, this improvement means we are beyond the worst of COVID-19. We have presented 2 distributable income per share numbers, ZAR 1.86 per share based on the number of shares in issue during the period and ZAR 1.61 per share if we dilute for the shares issued pursuant to the 2020 distribution reinvestment alternative which was implemented in January 2021. We have done the same for the net asset value per share which results in an NAV per share of ZAR 74.48 and ZAR 66.91, respectively. The REIT FFO calculated in terms of the BPR is ZAR 512 million. The main difference between this and the lower distributable income are the reductions for the ZAR 30 million of income, which cannot be remitted from Nigeria, and the difference in the number of shares used to calculate the FFO per share and the diluted distributable income per share. As I mentioned, we have focused heavily on cash management over the period. There is a lot of information on this slide, but I do think it is 1 of the more important analyses that we present. Cash generated from operations for the group was ZAR 663 million compared to ZAR 473 million of distributable income. The key contributors to this excess are the working capital improvement of ZAR 95 million in South Africa and the ZAR 32 million cash generated by Ikeja, which is trapped in Nigeria and has been deducted in calculating the distributable income. As previously mentioned by Morné, in June 2020, rental arrears in SA had increased to ZAR 137 million. Credit must go to the teams at each mall in the group for their efforts in reducing these arrears to ZAR 107 million at December 31. Prepaid rentals are an important element of the monthly cash flow cycle. In addition to reducing arrears, trade and other accounts payable have increased since June 2020, partly due to better management of the payment side of the cash flow equation and an increase in rentals received in advance. The improvement in cash collections is also evident in the graph on Slide 7, which shows that collections were ZAR 80 million or 5% more than the net amounts invoiced to tenants after COVID-19 discounts. The cash interest cover ratio has also improved. It was 3.8x cover in December compared to the 3.4x cover in December 2019 before COVID-19. The other noncash items reflected in this schedule and capital items for distribution purposes are 1 and the same. They relate to unrealized foreign exchange gains or losses recognized in the statement of comprehensive income. Turning to the next slide and what we will do with the cash. Firstly, we must thank the 82% of shareholders who elected the share reinvestment alternative and allowed us to keep the cash for future use. In the period, we've repaid ZAR 625 million of debt on the -- which was reflected on the June balance sheet. $99 million of equity debt in Hyprop Mauritius were settled in July and August from new local rand borrowings. We also settled the last remaining $18 million of equity debt in Hyprop Mauritius in December. The rand equivalent at June 30, 2020, was ZAR 317 million. The strengthening of the rand against the dollar and the euro over the period reduced the group's total debt by over ZAR 600 million. The total debt for which the group is responsible, i.e., including the euro debt we've guaranteed, has therefore reduced from ZAR 13.9 billion to ZAR 12.5 billion at December 31. The remaining dollar debt on the graph is the $57 million bank loan and a tax subordinated shareholders' loan in Ikeja. Following from this, we have an analysis of the group's LTV and how this has changed in the past, and we see it changing in the future. The LTV reduced from 41.4% in June to 38.8% in December, as shown in the top left-hand graph. Most of the reasons for this reduction have already been mentioned: debt repayments and the strengthening of the rand. The LTV covenant calculations have been amended with some of the lenders to bring all lenders' corporate LTV covenants in line with the see-through LTV methodology we present. The bond program uses a similar LTV calculation. I must thank our lender banks for their ongoing support and willingness to work with us in a very constructive manner. The detailed LTV calculation is set out on Slide 60 of the presentation. Slight changes have been made to the calculation since June to set off cash against the debt, and to include derivative liabilities in the calculation, in line with the banking covenants and the REIT BPR. With at least 10% headroom between the actual LTV calculation and the covenants, we believe there is sufficient tolerance for a devaluation of the rand or changes in property valuations, as shown in the bottom left-hand graph. We will continue to work towards reducing our corporate LTV ratio. In anticipation of the EUR 188 million of Hystead equity debt, which matures in October and November 2021, the Board has approved an in-principle proposal to reduce our exposure to the euro-denominated debt in Hystead. The effect is shown in the top right-hand graph -- that should be, the effect of the total proposal is shown in the top right hand graph. The proposal includes settling both rand and euro-denominated loans from the proceeds of the sale of Atterbury Value Mart, available revolving credit facilities and approximately ZAR 570 million from the 2021 operating cash flow. In addition to reducing the overall LTV ratio and exposure to the currency risk inherent in securing euro loans with rand-denominated assets, we also want to improve the mix of rand and hard currency borrowings with each lender. This will help reduce the impact of the devaluation of the rand on the secured portfolio LTV ratios of the respective lenders. The sale of Ikeja remains an important element in reducing the group's LTV ratio, and will do so by nearly 4% when implemented. The successful implementation of all these initiatives, including the sale of Ikeja, will reduce the LTV from 38.8% to 31%. By comparison, looking at the right-hand or the bottom right-hand graph, the group's LTV ratio calculated in terms of the REIT BPR is 24.4%. The main reason for this is that the REIT BPR ratio is based on the debt reflected on Hyprop's balance sheet rather than including all the Hystead stead debt, which Hyprop has guaranteed. We still maintain that the see-through LTV ratio as presented, is the most appropriate measure of the group's LTV, and it is the only ratio that matters in terms of banking covenants and DCM covenants. Looking at the group's debt maturity profile into the future. The in principle proposal which I referred to will address the debt which matures over the next 12 months, potentially as follows: The in-country bank funding to Ikeja was refinanced last week with a new 2-year term loan, and that has been implemented. The EUR 49 million in-country loan in Hystead, which matures in March 2021, is being extended with the current lender for a further 2 years. Rabia and the team have almost completed the paperwork around this. The EUR 188 million of equity debt which matures in October and November 2021, and the further EUR 50 million maturing in March 2022 provide the opportunity to restructure this debt. While we have our own ideas on how this debt could be refinanced, including that Hystead should retain all its distributions and utilize this cash to settle debt, we still need PDI's consent on how we ultimately restructure or refinance the gearing. The majority of the ZAR 1.5 billion of debt maturing between now and January 2022 will be settled from current liquidity; i.e. available cash and available facilities. Cash generated from operations will be used to pay down RCFs on a monthly basis. As indicated on the previous slide, we are looking to reduce our total debt by over ZAR 1.6 billion over the next 12 months. A couple of other things just to point out in the results. We've included a balance sheet and profit and loss account for Hystead in the annexes of the presentation. Hopefully, this assists analysts in understanding Hystead's financial performance, notwithstanding the accounting treatment. The REIT BPR ratios have also been included in the publication. As more REITs publish this information, I think clarity will emerge on how these ratios are being interpreted and should be calculated. In light of the current economic circumstances and the objective to strengthen the balance sheet, the Board has deferred a decision on paying a dividend until the final results are published in December -- sorry, September 2021. We continue to work with the JSE on whether a REIT can pay a noncash distribution. This has implications for how we deal with the remaining 24% of the 2020 distributable income which has not yet been declared as a dividend. In conclusion, the current liquidity remains good with ZAR 284 million of cash after settling the 2020 distributions and ZAR 1.15 billion of available facilities. We will continue to focus on cash collections and cash flow management. Over the last 18 months, we've made progress reducing our debt. We will continue to do so with the support and cooperation of our lenders, shareholders, regulators and co-shareholders. Lastly, I'd like to thank our regional executives, the general managers and finance teams at each of our malls in South Africa, Europe and Africa for their hard work during the last 6 months, particularly in reducing arrears and safeguarding the group's cash flow. Also, to my head office finance team, thank you for all your hard work, not only in preparing these results, but every day that you come to work, whether by car or Teams or Zoom. Thanks very much, and back to you, Morné.

Thank you very much, Brett. Just in closing, as I said, our purpose is we want to create safe environments and opportunities for people to connect and have authentic and meaningful experiences. And how we want to achieve that is actually managing and controlling -- or managing and owning dominant retail centers in mixed-use precincts and strong economic nodes in Europe as well as South Africa. In terms of the group, we want to ensure we take a long-term view. I think it's important that we don't make short-term decisions. And therefore, we want to keep our focus on our core purpose, and actually create value in the long term for all our stakeholders. One of the things we also will do actively is to recycle assets that doesn't fit within the long-term asset and long-term strategy. And by recycling those assets, we effectively will be able to reduce our debt in according to what Brett has highlighted. The essential CapEx will only be spent. We won't spend our money on CapEx that's not required, except on CapEx where we do believe there is a long-term benefit of actually spending the money on the specific CapEx. The result, the Hystead structure is quite important for us. As we all know that contract was always drafted in such a sense where there's a liquidity event. The liquidity event could have been in the form of a IPO or sale of the assets. Before Hyprop will do anything on that portfolio, we want clear clarity around the values of the properties as well as the impact of COVID in the long term. Just to give shareholders a bit of comfort, should we not come to a liquidity event and agreed terms with PDI, the contract doesn't automatically lapse. It actually will remain in place. 1 of the things that will happen is that the free carry that PDI have had through the structure will come to an end. One of the other things that's also sometimes a concern for the shareholders is what would happen should Hystead be consolidated on our balance sheet. With the reduction in our debt, where we potentially are going to reduce the debt with a planned strategy. If we look at a consolidated basis, it will reduce to about 45%, so that will -- even on a consolidated basis, we will be within our group's LTV covenant. In terms of South Africa, we want to successfully implement the sale of Atterbury Value Mart and we want to proceed with the repositioning strategies on all our malls. In Europe, we want to implement the in-country refinancing initiatives as well as proceed with improving the dominance of our Hystead portfolio. Exit Africa, as Wilhelm has touched on, and I do believe we are making good progress on that exit process. We will go into a Q&A session now, and then we can finish after that.

Our first question is from Donald Rogan from Nedbank Privatewealth about self storage strategy. He says, surely this is an area that will be overtraded as excess capacity comes online. What are the margins on this compared to retail outlets?

It depends on storage facility-to-storage facility in what space you are converting. I mean, in the Rosebank Mall, we are converting unutilized parking areas into a storage facility. The main benefit for that is actually the CapEx to convert that is not huge, and we can make quite attractive returns. And why do we have excess capacity at the moment in the parking is effectively due to improvement of public transport.

Okay. Naeem Tilly from Sesfikile is asking, can you please provide an update on negotiations with PDI? What will Hyprop's LTV be? Should it acquire PDI and fully consolidate for this investment?

As I mentioned, if we can't come to conclusions with PDI, then it will have to be consolidated on our balance sheet. With the reduction in our LTVs, it will come to about a 45% LTV on a consolidated basis.

Okay. Next question is to give color on the delay of Ikeja Mall, which was done before, Wilhelm presented on that. So I think that's been answered. How long do you envisage retaining income from Hystead to reduce euro-denominated debt? Can you quantify the dilution caused to earnings from perhaps de gearing, i.e., from reducing offshore debt, disposals and the DRIP?

We haven't disclosed those numbers, but we -- the calculation can be done. I mean you know what the income is from Atterbury Value Mart, your distributable income will reduce with that and Hystead effectively -- if you look at our distributable income for the last 6 months, there wasn't really much income from Hystead at [ Atpolenta ].

Okay. [ Mayhew Andelay ] from [ Ebso ] Capital is also asking for an update on PDI, which you've touched on. He's also asking, do you still regard an increased shareholding in Hystead and consolidation as a highly probable outcome?

One of the things, as I've mentioned before, I think what I like about the Hystead portfolio, I see a lot of positive growth from the Hystead portfolio. Its assets we understand and know. If we could get it at the right price, we will definitely -- that's something we would consider because to acquire something and diversify our exposure from South Africa into Europe, that is a positive position to be in. So at the right price, we will definitely consider increasing our stake in Hystead.

I've got 2 more questions from [ Ahir ]. Can you elaborate on the more restrictive terms related to the EUR 49 million in-country debt in Hystead? And how does this influence the cash flows at present? How do you expect those to impact cash flows going forward?

[ I do -- can you ] understand that question?

Yes, [indiscernible]. I think the restrictions really revolve around cash sweeps and limitations on what proportion of the profit can be paid out as a dividend to the shareholders. We actually think it's quite an attractive thing because it allows us to start reducing the in-country debt within Hystead, which is the more expensive debt as well. I think the broader picture of what distributions we're going to receive from Hystead and how those distributions are used is more difficult, but certainly this cash is then being applied to settle euro-denominated debt.

Brett, another one for you. Can you provide further detail on the Board's decision to reduce or refinance the EUR 180 million debt? Will Hyprop look to repay or refinance the entire balance, including PDI proportion of the exposure?

The proposal at the moment is really a proposal. There's a lot of work to do before we have certainty on exactly what portion could be refinanced in rands, converted to equity, or refinanced in euros. I think we need a couple of months to do the work with the lenders, and we can then come back to the market with some indication on how much it will cost, what the impact on distributions could be and what the new capital structure will look like. We obviously also need to agree this with PDI, and we've not formally engaged them on this latest proposal that we've got.

Okay. Evan Jankelowitz from Sesfikile. Valuations on Hystead appear to be impacted largely by the 25 basis point increase in cap rates and the impact from revenue being negligent (sic) [ negligible ]. Can I ask what was the reversions on renewals? And did it support this view?

The full details of the reversions on our asset portfolio as well as the European portfolio is disclosed in the annexes in the presentation.

Okay. Similarly, on the SA assets, have there been any structural impairments on NOI in reviewing the NAV? And if so, what was the write-down of the NOI base?

As I mentioned in the presentation, if you look at how much our distributable income has reduced by over and above the impact of COVID. I've mentioned a number of about ZAR 97 million which you look at the 6-month period, and that was driven mainly due to reversions as well as increase in interest expense due to the fact that we converted some of our equity debt into rand debt. So if you want to say what is the reset base in terms of distributions, I think ZAR 97 million is a good number to use. Obviously, that's for 6 months. So if you gross it up, you're potentially looking at ZAR 200 million.

Okay. Ross Krige from JPMorgan is asking, on reversions in South Africa, how does the average rental rate on this period's renewals compare to the portfolio average?

I will have to come back. I don't know if that number is exactly on the top of my head.