Less than 5 years after purchasing Ikeja City Mall for a total consideration of $155 million, Hyprop has announced an agreement to sell for $115m to an undisclosed investor. The Hyprop team has held fast on their resolve to exit the sub-Saharan Africa region (excluding South Africa) and focus on optimising their South African and Eastern European property portfolio since the plans were announced in September 2018. Disposal activity commenced during summer 2019 when the group sold Achimota and Manda Hill malls to GrowthPoint Investec African Properties.

Ikeja City Mall is a 22,223sqm shopping centre located in Ikeja, Lagos that was developed by a consortium of investors including Actis, Paragon Holdings and RMB Westport. It opened in December 2011 and has tenants including Shoprite, L’Occitance, Mac, Rhapsody’s, Silverbird Cinemas among many others.

In the latest results, Hyprop notes the following:

• The valuation of Ikeja City Mall reduced from $141 million in 2019 to $115 million in June 2020. For context, Actis and the other investors exited the investment in 2015, by selling to Hyprop (75%) and Attacq (25%) for $155 million at a sub-9% yield. Uncertainty and volatility in financial markets as a result of COVID-19 were cited as the major factors that put property valuations for their entire portfolio under pressure.

• Pre-COVID-19 year on year net operating income for the shopping mall grew by 9.4%, but the virus led to a $1.4 million decline in revenue and an additional $1.6m of expected credit losses.

• Liquidity constraints in the Nigerian foreign exchange market mean that Ikeja City Mall has been unable to secure US Dollars to remit income to its shareholders since December 2019.

According to the consolidated results, the purchasers have concluded their due diligence, however, the sale remains subject to regulatory approvals and the purchasers raising the necessary finance to settle 70% of the purchase price. Net proceeds from the disposal will be applied to reduce the Group’s remaining US Dollar-denominated debt of $18 million and thereafter Rand Debt.

The undisclosed investor will join other investors such as Growthpoint Investec African Properties and the GRIT Group among others, who are increasingly adopting a permanent capital structure/income fund approach to investing in commercial real estate on the continent.