Directors' report

for the year ended 30 June 2017

The directors have pleasure in submitting their report, which forms part of the consolidated financial statements for the year ended 30 June 2017.

Responsibility statement

The directors are responsible for the preparation and fair presentation of the consolidated financial statements of Hyprop, comprising the consolidated statement of financial position, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, as well as the notes to the consolidated financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and the directors' report.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.


Hyprop, a leading specialist shopping centre Real Estate Investment Trust (REIT), operates a portfolio of shopping centres in major metropolitan areas across South Africa (SA), sub-Saharan Africa (excluding SA) and South-Eastern Europe.

The core portfolio in South Africa includes super regional centre Canal Walk, large regional centres, Clearwater Mall, The Glen Shopping Centre, Woodlands Boulevard, CapeGate Shopping Centre, Somerset and Rosebank Malls, and regional centre, Hyde Park Corner.

The sub-Saharan African portfolio (excluding SA) includes interests in Accra Mall, West Hills and Achimota Mall (all in Accra, Ghana), Kumasi City Mall in Kumasi, Ghana, Manda Hill Centre in Lusaka, Zambia and Ikeja City Mall in Lagos, Nigeria.

Hyprop's investments in South-Eastern Europe includes a 60% interest in Delta City Belgrade, Serbia, Delta City Podgorica, Montenegro and Skopje City Mall, in Skopje, Macedonia. In July 2017, Hyprop agreed to acquire a 60% interest in The Mall in Sofia, Bulgaria.


Hyprop's strategy is to own dominant, quality shopping centres, where such assets can be acquired, or developed at attractive yields. Due to limited acquisition opportunities in South Africa, consideration is given to investments in other markets, where existing assets can be acquired at attractive yields and where attractive development opportunities exist.

Directors' interests

The interests of directors in the shares of the company at 30 June 2017 were:

        June 2017
  June 2017
            June 2016
June 2016
  Direct Indirect     Indirect   Direct Indirect Indirect  
Gavin Tipper 4 000           4 000      
Louis Norval         3 500 000       3 500 000  
Stewart Shaw-Taylor 21 500           21 500      
Kevin Ellerine   378 000       378 000
Nonyameko Mandindi   2 250            
Pieter Prinsloo   325 202           305 049
Laurence Cohen   171 259           160 154
  25 500 876 711     3 500 000   25 500 843 203 3 500 000  

There were no changes to the interests of the directors between year-end and the date of approval of these consolidated financial statements.


During the year, the following disposals were completed

  Sale price   Transfer date  
Somerset Value Mart R185 million   September 2016  
Glenfield Office Park R180 million   December 2016  
Willowbridge South R460 million   March 2017  
Glenwood Office Park R42 million   May 2017  
Total R867 million      

The sale of Willowbridge North for R225 million is unconditional and transfer is anticipated in September 2017. Of the non-core properties that were identified for sale, only Lakefield Office Park remains to be sold. Willowbridge North and Lakefield Office Park were included under assets held-for-sale in the consolidated statement of financial position at 30 June 2017.

Capital structure

Hyprop is structured as a REIT. South African REITs are exempt from capital gains taxation. Provided they pay out 100% of distributable earnings as a dividend to shareholders, they also do not pay corporate income taxation.

Hyprop currently pays out 100% of distributable earnings as dividends to shareholders and therefore does not pay corporate income taxation.

Review of activities

The results of the group are commented on in the reports by the chairman and chief executive officer, and the financial director and are set out in the consolidated financial statements on pages 95 to 98.


Independent non-executive director EG Dube resigned from the board on 1 December 2016 and independent non-executive director N Mandindi was appointed on 8 May 2017.

Directors who served during the financial year are as follows:

GR Tipper(1) MJ Lewin(1)
PG Prinsloo(3) L Norval(2)
LR Cohen(3) S Shaw-Taylor(1)
EG Dube (resigned 1 December 2016)(1) TV Mokgatlha(1)
KM Ellerine(2) N Mandindi (appointed 8 May 2017)(1)
L Engelbrecht(1)
(1) Independent non-executive
(2) Non-executive
(3) Executive

An abridged curriculum vitae for each director is set out on our Board of directors page.

Subsidiaries, joint arrangements and associates

Disclosure of investments in subsidiaries, joint arrangements and associates is included in notes 4 to 6 in the consolidated financial statements.

Administration and management

Property and asset management in Hyprop's South African operations are fully internalised. No property or asset management fees were paid during the year in South Africa.

Investments in South-Eastern Europe

The group's investments in South-Eastern Europe are held by a joint venture investment holding company, Hystead Limited (Hystead), a United Kingdom registered company, in which the group has a 60% equity interest. In terms of the Hystead shareholder agreement (the shareholder agreement), Hyprop has joint control of Hystead.

The shareholder agreement also includes, to the extent that Hystead has distributable earnings from its property investments, a contractual right by the Hystead shareholders to receive dividends from Hystead. This contractual right to receive dividends results in the investment in Hystead being accounted for as an investment in a financial asset (in terms of IFRS). Refer to note 6.3 – 60% – Joint venture – Hystead Limited (Hystead).

Hystead's initial investments in South-Eastern Europe (in Serbia and Montenegro) were funded with a funding structure in the Netherlands (the Netherlands funding structure). The Netherlands funding structure includes third-party bank funding for the majority (ie 99%) of the South-Eastern European funding requirements, with credit enhancement (in the form of a guarantee) from Hyprop.

The funding structure also includes loans by Hyprop to two companies in the Netherlands funding structure, Vondelvlag Holding and Vondelvlag Stichting, for Hyprop's share of the remaining 1% of the funding requirements. Refer to note 10 – Loans receivable.

The third acquisition by Hystead, that of Skopje City Mall in Skopje, Macedonia (effective in October 2016), was also funded with third-party bank funding supported by a guarantee from Hyprop, but with Hystead as the borrower.

Audit and risk committee report

The audit and risk committee fulfilled its responsibilities during the year (refer to the audit report for full details). The committee has further satisfied itself as to the independence of the external auditors and their suitability for reappointment for the ensuing year.


The auditor is responsible for reporting on whether the consolidated and separate financial statements are fairly presented in accordance with the applicable financial reporting framework.

KPMG Inc. was appointed as auditors in accordance with part C of section 90 of the Companies Act of South Africa.

Directors' interest in contracts

No material contracts in which the directors have an interest were entered into during the year, other than the transactions detailed in note 33 – Related parties and related-party transactions to the consolidated financial statements.

Going concern

The directors consider that the group and its subsidiaries have adequate resources to continue operating for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements.

The directors have satisfied themselves that the group and its subsidiaries are in a sound financial position and that they have access to sufficient borrowing facilities to meet their foreseeable cash requirements.

Trading statements

Hyprop uses dividend per share as the relevant measure of financial results for trading statement purposes.

Approval of the consolidated financial statements

The consolidated financial statements of Hyprop Investments Limited, as identified in the first paragraph, were approved by the board of directors on 1 September 2017.

Company annual financial statements

The integrated report includes the audited consolidated financial statements. The audited financial statements of the company are available for review and inspection at the registered office of the company.

GR Tipper

PG Prinsloo
Chief executive officer


1 September 2017