NOTES TO THE FINANCIAL STATEMENTS — NOTE 6

6. Investment in joint ventures
 
       
  Proportion of ownership
interest and voting power
held by the group
 
Name of joint venture   Principal activity   Place of incorporation
and operation
  June 2017   June 2016  
AttAfrica Limited (AttAfrica)   Investing in indirect development or income producing properties in sub-Saharan Africa (excluding SA)   Mauritius   37,5%   37,5%  
Manda Hill Mauritius Limited (Manda Hill Mauritius)   Property investment company   Mauritius   50%   50%  
Hystead Limited (Hystead)   Investing in income producing properties in South-Eastern Europe   United Kingdom   60%   60%  
   
6.1 37,5% – Joint venture – AttAfrica Limited (AttAfrica)

Hyprop Mauritius has a 37,5% interest in AttAfrica (formerly Atterbury Africa Limited), a Mauritius-based property investment company. The initial investment was made on 20 November 2012. Hyprop Mauritius has 50% of the voting rights on the board of AttAfrica. Hyprop Mauritius accordingly has joint control of AttAfrica.

 
   June 2017 
R000 
   June 2016 
R000 
  
Initial investment in equity  (1)    (1)   
(1) Value less than R1 000             
At 30 June 2017, Hyprop Mauritius’ 37,5% share of AttAfrica’s liabilities exceeded its share of the assets by R186 million (2016: R130 million).             
A summary of audited financial information of AttAfrica is as follows (all figures reflect 100% of AttAfrica):             
Summary of audited statement of profit or loss and other comprehensive income             
Revenue  233 881     320 219    
Loss before taxation(1)  (484 272)    (196 827)   
Taxation  8 329     (30 694)   
Loss for the year  (475 943)    (227 521)   
Other comprehensive loss (foreign currency translation reserve) 22 699     23 010    
Total comprehensive loss for the year  (453 244)    (204 511)   
(1) Loss before taxation includes:             
     Net interest  (313 780)    (279 944)   
     Depreciation  (1 162)    (798)   
Attributable to:             
Equity holders of the company  (319 426)    (163 316)   
Non-controlling interest  (133 818)    (41 195)   
Summary of audited statement of financial position             
Non-current assets  4 538 950     4 695 644    
Current assets(2)  339 945     462 388    
Non-current liabilities  5 271 037     5 141 012    
Current liabilities  232 270     207 278    
(2) Current assets include cash and cash equivalents of:  39 900     49 285    
– Unrecognised share of losses in AttAfrica  186 031     129 887    
– Commitments and contingent liabilities relating to AttAfrica:             
Guarantees  655 431     742 305    
   
6.2 50 % – Joint venture – Manda Hill Mauritius Limited (Manda Hill Mauritius)

Hyprop Mauritius has a 50% interest in Manda Hill Mauritius, a Mauritius-based property investment company. AttAfrica holds the other 50% of the shares in Manda Hill Mauritius. Hyprop Mauritius’ effective economic interest in Manda Hill Mauritius is 68,75%. The effective date of the investment was 1 July 2014. Hyprop Mauritius has 50% of the voting rights on the board of Manda Hill Mauritius. Hyprop Mauritius accordingly has joint control of Manda Hill Mauritius.

 
   June 2017 
R000 
   June 2016 
R000 
  
Initial investment in equity  (1)    (1)   
(1) Value less than R1 000             
At 30 June 2017, Hyprop Mauritius’ 50% share of Manda Hill Mauritius’ assets exceeded its liabilities by R14,5 million (2016: R57 million).             
Summarised audited financial information of Manda Hill Mauritius is as follows (all figures reflect 100% of Manda Hill Mauritius):             
Summary of audited statement of profit or loss and other comprehensive income             
Revenue  170 078     179 440    
Loss before taxation(1)  (117 382)    (75 363)   
Taxation  (12 302)    (6 651)   
Loss for the year  (129 684)    (82 014)   
Other comprehensive loss (Foreign currency translation reserve) (13 356)    54 343    
Total comprehensive loss for the year  (143 040)    (27 671)   
(1) Loss before taxation includes:             
   Finance cost  (108 582)    (119 033)   
   Depreciation  (3 109)    (16 070)   
Attributable to:             
Equity holders of the company  (143 040)    (27 671)   
Hyprop’s share of losses of Manda Hill  (50 380)    (41 007)   
   – Share of loss from joint venture  (64 843)    (41 007)   
   – Limitation of loss from joint venture  14 463          
Summary of audited statement of financial position             
Non-current assets  1 834 321     2 208 512    
Currents assets(2)  9 251     26 855    
Non-current liabilities(3)  1 861 833     2 098 725    
Current liabilities  10 663     22 527    
Net assets  (28 924)    114 115    
(2) Current assets include cash and cash equivalents of:  1 472     3 534    
(3) Includes non-current financial liabilities (excluding trade and other payables and provisions)  1 852 919     2 098 723    
Carrying amount of Hyprop’s share in net assets  10 103     57 057    
Commitments and contingent liabilities relating to AttAfrica             
Guarantees  Nil     Nil    
   
6.3 60% – Joint venture – Hystead Limited (Hystead)

Hyprop has a 60% interest in Hystead, a UK-based property investment company. The effective date of the investment was 3 December 2015.

The shareholders’ agreement between Hyprop and the remaining 40% shareholder (the JV partner) includes reserved matters and voting rights such that Hyprop has effective joint control of Hystead. The purpose of Hystead is to invest (directly or indirectly) in shopping centres in South-Eastern Europe.

 
   June 2017 
R000 
   June 2016 
R000 
  
Percentage ownership Interest  60%     60%    
Dividends received by Hyprop  146 350          
Summary of audited statement of financial position             
(all figures below reflect 100% of Hystead unless otherwise indicated):             
Non-current assets  4 088 180     3 385 254    
Current assets  114 692     124 313    
Total assets  4 202 872     3 509 567    
Non-current liabilities  766 045     2 523 323    
Current liabilities  3 296 310     921 153    
Capital and reserves  140 517     65 091    
Total equity and liabilities  4 202 872     3 509 567    
Group’s share of net assets (60%) 84 310     39 055    
Summary of audited statement of profit or loss and other comprehensive income             
Revenue  233 857     182 354    
Expenses  (102 380)    (60 426)   
Taxation        (7 812)   
Profit for the year  131 477     114 116    
 

The fair value of Hyprop’s investment in Hystead was determined as R1,5 billion (EUR89,8 million) at the date of acquisition. The day-one gain of R1,5 billion was deferred (in accordance with IFRS), since the valuation method includes assumptions which were derived from unobservable inputs. Subsequently all acquisitions have been treated in the same manner with day-one gains deferred and subsequent fair value movements recognised, resulting in a total deferred value of R2 billion (EUR135,7 million) at year-end.

As credit enhancement was provided by Hyprop, the JV partner reimburses Hyprop in the form of an increased right by Hyprop to dividends from Hystead (ie disproportionate to shareholding), while the guarantee is in place (refer to note 7 – Financial guarantees). Hyprop has accounted for its economic interest in Hystead in determining the fair value of its investment.

The following table shows a reconciliation from the opening balances to the closing balances for the Hystead investment:

   June 2017 
R000 
  June 2016 
R000 
  
Balance at 1 July         
   Acquisition of 60% equity investment in Hystead at cost (1)       
   Net change in fair value 1 472 754       
   Deferral of unrealised fair value change calculated with reference to unobservable inputs (1 472 754)       
Unrealised foreign exchange loss (112 340)       
Net change in fair value of new assets (acquisition of Skopje City Mall, Skopje, Macedonia) 661 868   1 472 754  
Deferral of unrealised fair value change calculated with reference to unobservable inputs (day-one gains) (549 528)   (1 472 754)   
Balance at 30 June         
(1) Value less than R1 000
    June 2017
R000
  June 2016
R000
 
6.4 Reconciliation of share of net assets to statement of financial position        
  AttAfrica        
  Manda Hill Mauritius 10 103   57 057  
  Hystead        
    10 103   57 057  

NOTES TO THE FINANCIAL STATEMENTS — NOTE 6