South Africans buy €203m CEE malls, target €1b portfolio

South African shopping centre REIT Hyprop Investments and Homestead Group Holdings have acquired two malls in Serbia and Montenegro in a share deal valued at just under €203 mln.

As part of the deal, Hyprop is taking a 60% stake in the asset for €122 mln while Homestead, a company associated with South African property Tycoon Louis Norval, a non-executive director of Hyprop, acquired the remaining 40% in both malls.

The Serbian asset, Delta City Belgrade was bought from Delta Real Estate Group (Delta), a private Serbian company, for €128 mln while the Montenegrin property, Delta City Podgorica was purchased from Hemslade Trading Limited Cyprus (Hemslade) and Delta for a price of €75 mln.

Under the deal, a newly formed UK company called Hystead will effectively hold the ownership in both shopping centres. Hyprop has elected to acquire the shopping centres in an offshore joint venture with Homestead.

Pieter Prinsloo, Hyprop's CEO said: 'These acquisitions are an attractive investment which complements our strategy to acquire or develop high-quality, income-producing shopping centres in emerging markets.' The deals 'may be the first of further acquisitions in Central and Eastern Europe,' he added.

Hyprop said it aims to have partial ownership of a high-quality shopping centre portfolio in these regions, with a value of €1 bn, within five years.

Laurence Cohen, Hyprop's Finance director said that 'both malls will enhance Hyprop’s distributions, as funding rates in Europe are comparatively low and the acquisitions offer a healthy net income return in excess of 8%'. In order to mitigate the currency risk, 100% off-shore funding was raised in euros.

Delta City Belgrade is a modern shopping centre with 29,876 m2 of GLA and 122 shops in New Belgrade. Delta City Podgorica is a dominant shopping centre offering 23,608 m2 of retail GLA, with 80 shops. The mall is located on the main boulevard in Podgorica, the capital city of Montenegro, with a catchment area of over 210,000 people.

For a period of 12 months, Delta will oversee the management of both malls on behalf of Hystead, with the existing mall staff continuing their employment with the newly acquired companies. Over this period Hystead will consider the establishment of a local management office in Belgrade.