I want to say thanks to everyone for attending here, joining us for the Hyprop pre-close for FY 2026. Big thank you to those that are joining us online. Slightly bigger thank you to the guys that are here in person. I know some of you did not get much sleep, busy watching Bafana Bafana get to the knockout stages last night. Just maybe staying on that positive theme. We do seem to have a fairly transformed and simplified business. I think Hyprop has done quite a bit to transform itself over the last couple of years. Right now, they are sitting with quite a bit of balance sheet capacity. When you work out the pro forma post the Galleria Burgas acquisition, it looks like you are sitting on a sort of 32% LTV, which means there is still a lot of room to do a lot of exciting things.
I think all the members here will be quite keen to hear what you guys have planned. If you are feeling very confident, you can also give us guidance for FY 2027. Just in terms of housekeeping, I do think it is worth just really pointing out that the way this will run is the management team will go through the entire presentation first, then there will be Q&A. The Q&A that is done virtually will go through myself. I will just read the question verbatim, just also quoting exactly who is asking that question. For those that are in the room, you can just raise your hand, and then the question will be asked just like that. With that out the way, I would like to hand over to CEO Morné Wilken.
Good morning, and thank you for joining us this morning. The voice carries quite a bit here. In terms of Mweishö, thank you for you and your team being here and for hosting us. We really appreciate it. We will give you an operational update for the period from January to May 2026. At the end of the presentation, we will give you some time for questions. The why for Hyprop is creating spaces and connecting people. The way we do it is owning, managing, and redeveloping dominant retail centers in mixed-use precincts in key economic nodes of South Africa and Eastern Europe.
When we started or got involved, we set ourselves the following key priorities: drive new and organic growth opportunities in our focus areas; accelerate the repositioning of our South African and Eastern Europe portfolios to ensure dominance and grow market share; annual reviews of our portfolio to ensure we keep the right assets and identify recycling opportunities; implement sustainable solutions to reduce the impact fall of the infrastructure challenges we have specifically in South Africa, but we also do rolling it out in Eastern Europe. One of the key things, ensuring we keep a healthy balance sheet. I do think we have achieved all of these, and we have made very good progress in terms of that. Now, if we look at our South African portfolio, over the last few years, we have made good work to actually ensure we meet our shoppers' demand. We optimize our tenant mix.
We have increased our exposure to Checkers FreshX as an anchor in our portfolio. We opened them at The Glen, Rosebank Mall, Woodlands Boulevard, Somerset Mall, as well as Hyde Park Corner. We extended Somerset Mall by about 5,500 sq m, and we have reduced our energy cost with the installation of solar plants completed in and progress on our whole South African portfolio. We also implemented a fully integrated solar and generator and battery solution at Rosebank Mall, and we will be doing the second one in Hyde Park, as well as the third in Somerset Mall. All of these changes has improved our tenants' performance. Something that is quite key for us to see that our tenants' turnover is growing, so we measure that quite closely, and we also look at reducing our cost of occupancy, and that has been very good for our portfolio.
Now, if you look at the five-year trend here, you can actually see, I think these repositionings are paying off. Our tenant turnover has increased by 5% for the last 12 months up to May. The annual trading density has increased by 6%. The difference between the two, we have right-sized some stores. When you right-size it, obviously you get a bit of a kicker on your trading performance. I think we have shown good growth in footfall, as well as vehicle count. Footfall is up 1.7% and vehicle count 3.1%. On this slide, we actually show the five months of operating performance over the last three years. As you can see on this slide, we have shown very good growth on all five months, and the tenant turnover was the highest in January. Tenant turnover for the five-month period compared to 2025 has increased by 5.5%.
Likewise, we have seen very good growth in our trading density and also the highest growth in January. We have made very good progress right-sizing Edgars in our portfolio. The last one that is outstanding is the one at CapeGate. We have started the project. We will right-size or reduce Edgars space. In the take-back space, we will increase Sportscene. We will bring in JD Sports as well as a leisure entertainment offering from Freedom Adventure Park. In terms of our rent reversions, we still experiencing positive rent reversions. Looking at the top table on the left-hand side, we see positive rent reversions in our retail space as well as our office space. Overall reversions rate was 9.8% positive, but it relates to 21.1% of our total portfolio GLA. New deals under retail have shown growth of 32.8%. The question has been asked, why is that growing so much?
We must say, when you right-size, sometimes a tenant, and you take back some space, that is the base you are starting with. Smaller tenants, obviously, you get better rentals from that. We have shown an overall growth of 7.7%. The graph on the top right-hand side, we are looking in terms of that GLA we have renewed what was positive. That is 55% of that GLA, 23% flat, and 22% negative. The table on the bottom left shows you the vacancy in our portfolio. We have reduced our retail vacancy to 3.3%, and what we have done quite effectively is reducing our office space vacancy from a peak of 30% to 7.7%. During the last 11 months, we have reduced our month-to-month leases. That is something we have been focusing on. In terms of GLA on month-to-month, we have reduced it by 35%.
Now we look at projects we have completed. We have completed the phase two solar at The Glen. That went live about two weeks ago. We increased our solar capacity with phase two by 3,205 kWp, with the total solar capacity being now 4,304 kWp. The solar was installed on carports, and it gives you the extra benefit of shade for our shoppers' cars. As part of phase two, we have upgraded the Somerset Mall bathrooms, and that has been completed in April of this year. Now looking at projects that is in progress. At Hyde Park Corner, the property we are currently, we are busy with phase two solar plus a battery storage facility, and that will be completed at the end of July. We increased the solar capacity by 946 kWp, with a total capacity of 1,300 kWp.
The solar installation, similarly than The Glen, is done on carports. We have done a little bit different. We lift the height of the carports. It is fully covered. It is waterproof in terms of water not coming through. We will be using it as an event venue and generate further income in time to come. Somerset Mall, as you would know, when we did the extension, we have moved Edgars from its current space into the corner with the extension. We have taken back the Edgars space. We will be converting that into entertainment and a new food court. As you would know, when we did Checkers FreshX, we actually used the old food court. We will be doing a new food court there, and that will be completed in August. At CapeGate, we have started our solar project. That is progressing well and will be completed in August.
The installation is 4,991 kWp, and that will add about ZAR 1 million to the bottom line per month when it is completed. Something that is also important for us is how do you integrate Canal Walk, which we haven't done successfully before, with the bigger Century City? One of the key things we have identified is for shoppers to come across the canal. So we are busy with two bridges. The one is called Otter Bridge, and the other one is the Crystal Towers Bridge. Otter Bridge will be completed at the end of the month. The photos on the slide actually shows the progress on that bridge. The Crystal Towers Bridge will be completed in November of this year. At Woodlands Boulevard, what we have started is the mall widening project. That is progressing well. That has started in May.
I am sorry, in March, and that will be completed in November. Part of the project, we will also upgrade the old tiles, the lighting, as well as shop fronts. We actually will unlock some of the retail space that was boxed in due to the right sizing of the Pick n Pay, and we will be putting in Clicks next to it. In the widening space, we are doing a seating area for coffee and restaurants, so we will definitely activate this side of the mall that was quite not trading that well as it should. At Canal Walk and Somerset Mall, we have started with the solar projects. The Canal Walk solar project is 7,665 kWp. The potential income benefit from this plant is ZAR 2.4 million per month when it goes live. It will be finished in February 2028.
The intention is actually to phase it. We won't just get all the benefit February 2028, and we will do it as we can phase the project over that period. Similarly, at Somerset Mall, we will install a plant of 5,040 kWp. As I mentioned before, it will include BESS. The income benefit would be about ZAR 1 million on completion, and the timing on that is completion is August 2027. At our Eastern Europe portfolio, we have been working hard to reposition this portfolio as well. We had a two-year redevelopment of Skopje City Mall in North Macedonia. At The Mall in Sofia, we have converted the old Hyper into a new mall area and increased the mall to 61,000 sq m. We upgraded the food court as well as the restrooms.
At City Center one West in Croatia, we have upgraded the food court, and we made the food court bigger. Plus, we have actually just recently completed the retiling of the complete mall. Due to these repositioning strategies, if you look at our five-year performance, you can see there's good growth on our tenant turnover. Our tenant turnover has increased by 4.3% over the last 12 months up to May. Our effort ratio in this portfolio has reduced from 11%, as you can see on the graph, to 9.9%, and our footfall has shown growth of 0.4%. There's a negative growth in terms of vehicle count. That was mainly due to the fact that at Sofia, we actually had a cycle race, and then the main road was closed. The people couldn't use their cars, and therefore, it had an impact on our vehicle count.
Although the footfall was still good. Looking now at the five months performance, over three consecutive years, we can see good growth in tenant turnover as well as trading density. If you look at the five months footfall compared to 2025, we have seen 5% growth. Although, if you look at month- to- month, it doesn't show that much. As I said, the vehicle count has been impacted given what I've just explained. Leasing activity. Top left, we actually can see nice renewals, 2.7% on reversions growth. That was on 13.7% of the total GLA. On new deals, we have seen positive reversions of 7.4%, although it was only on 2.6% of total GLA. Combinedly, new deals and renewals, we have had positive reversions of 3.4%.
Vacancy in May was zero, and the WALE on the portfolio is 3.2 years and is about 36.3% of our GLA only expiring after 2030. In terms of projects, we have started a solar project at both the Croatian malls. It took some time to actually get around. You have to be a registered electricity supplier to sell the electricity out. So what we have done is actually done something with an electrical supplier where they rent a space, and we're making a good return in terms of that, and they're selling effectively the electricity back to us. That will be completed in December of this year. Galleria Burgas. This acquisition is in line with our diversification strategy, and this will increase our Eastern Europe exposure in gross assets from 33% to 37% in our total portfolio. Bulgaria is a country well known to us.
We have been operating there for several years. The adoption of the euro in January will have a positive impact on the economy, as well as tourism, as well as the investment appeal for Bulgaria. This opportunity, I think, plays very well to our strength, namely active asset management initiatives, and we see potential upside in terms of that. The mall has a total GLA of 39,800 sq m and actually have a very good tenant mix. Burgas is the fourth largest city in Bulgaria. It has a population of 200,000 people in the immediate catchment area. If you look at the wider Burgas population, it is about 400,000 people. The mall was built in 2012. It went through a major redevelopment in 2024, and it is in very good condition.
The only outstanding CP is Commission for Protection of Competition, and we believe the transfer to happen before the end of July. Now, I will hand over to Brett to give us an update on our treasury.
Thanks, Morné. Good morning, everybody. In December 2025, the group's LTV was 31%, and the ICR for the six-month period was 3x covered. The LTV has subsequently reduced below 30% following the sale of the 50% undivided share in Woodlands Boulevard. The group's balance sheet and liquidity remain exceptionally strong and are underpinned by the consistently strong cash collections from our tenants, which exceeded 100% of billings again this year. At the end of May, the group held ZAR 1.7 billion in cash and had ZAR 2 billion of available facilities, creating total liquidity of ZAR 3.6 billion. This liquidity provides a solid foundation for our future growth, with some of the cash already earmarked to settle the equity portion of the Galleria Burgas purchase price.
Our cash balances are held mainly through money market funds, and the underlying exposure to individual banks is shown on the top left-hand graph on the slide. Looking at the bottom two graphs, total borrowings have reduced by ZAR 500 million since December 2025, and we continue to work with a variety of lenders in South Africa and Europe, all of whom are keen to do more business with the group. Following the bond auction in April 2026, the DCM portion of our total borrowings has increased to 27% and is approximately 45% of the rand borrowings. This level is unlikely to increase further, despite the attractive margins that we are seeing in the bond market at present. We will still look to refinance any maturing bonds in the DCM market, as we believe it is a valuable source of funding for the group.
When we compare the debt maturity profiles between December 2025 and May, you can see that a lot of the refinancing work for the calendar year has already been completed. The dotted lines show the effect of the refinancing work that has already been completed. The ZAR 490 million of bonds, which matured between January and May, were settled from available cash and revolving credit facilities, which have subsequently also been settled. in April, we held our most successful bond auction to date. Seeking to raise ZAR 500 million, we received bids exceeding ZAR 3 billion and elected to raise ZAR 580 million, comprising ZAR 273 million for three years at a margin of 94 basis points, and ZAR 307 million at a margin of 111 basis points.
The pricing was below the price guidance and is lower than our previous lowest margins by between 15 basis points and 20 basis points, depending on the term. We must thank the bond investors again for continuing to support us so well in our bond auctions. We have also refinanced a large proportion of the bank debt, which was maturing in calendar 2026. ZAR 750 million of term loans and revolving credit facilities that were due in August 2026 have been refinanced for three years with a 43 basis point reduction in the margins. We concluded our first ZARONIA transaction when we refinanced a portion of a ZAR 500 million unlisted bond in May 2026. ZAR 250 million of this bond was settled with the balance refined for two years at a lower rate of 35 basis points as the all-in cost of borrowing.
In the European portfolio, two revolving credit facilities were refinanced for two years with a 20 basis point reduction in the average margin. The EUR 50 million equity debt term facility that was due in July 2026 has also been refinanced. EUR 15 million of the facility was settled and the balance refinanced for 18 months at a 90 basis point reduction in the margin. Following from this, the equity debt term loans in our European portfolio have reduced to EUR 50 million from a peak of EUR 400 million in 2022. Lastly, the EUR 72.5 million in-country facility in Bulgaria, which was due to mature in December 2026, has already been refinanced at a slightly lower margin and for a period of seven years.
As an indication of the support that we receive from the European lenders, the bank was keen to increase this loan to EUR 100 million for us without changing the terms. Why won't it move? There we go. As a result of the margin reductions outlined above, the rand cost of borrowings has decreased from 8.6% in December to 8.5% in May. The cost of euro borrowings has reduced from 4% in December to 3.9% in May. This, despite the 30 basis points increase in the base rates. 79% of the group's interest rate exposure was hedged at the end of May, with an average hedge duration of 1.4 years, and this excludes any forward-starting hedges. 77% by nominal value of the rand hedges are caps and collars.
In 2026, we have enjoyed the benefits of the reduction in interest rates. But with the change in the interest rate cycle, there is some exposure to an increase in rates going forward. This is mitigated by the regular maturity and replacement of interest rate hedges, which will smooth any impact of interest rate increases. With that, I will give you back to Morné.
Thank you very much, Brett. I hope the bankers, there are quite a few of you here, have heard what those margins we are looking for. Good for you. I think one of the key things was, I think we have done quite a lot of work to reposition Hyprop. I think we are now on the front foot to actually grow the business. We are definitely on track to meet our guidance of 10%-12% growth in our distributable income per share. As we communicated before, we have increased our payout ratio to 82.5%, so that will be applied in our September dividend payout. We will revisit the payout ratio if we can increase it further, but that will only be communicated in September, and it will only be effective on our FY 2027 financial year. We are well advanced with another opportunity in Eastern Europe.
We are going to focus on our organic growth opportunities. I think that is quite beneficial for us because it is assets, you know, and we actually can extract quite a bit of value there, as well as it is quite accretive. The two we are looking at is the phase three extension at Somerset Mall, and then obviously the extension at City Center one East in Croatia. We are in discussions still with the Ellerine family. We have not done a deal. Just to give the shareholders some comfort, even though Kevin has stepped down from the Board, effectively, it will be a related party transaction at least 12 months thereafter, and therefore it will still come to shareholders for approval if there is a transaction. In the South African portfolio, we want to complete our solar projects, and we are making good progress with that.
We want to complete the integrated battery solution here at Hyde Park Corner, and we want to pursue further battery storage opportunities because those are also giving us quite good returns. We want to complete the last section of the phase two extension at Somerset Mall, which includes the new food court and the entertainment offering, finalize and start the extension of the phase one at The Glen master plan. We always continue our discussions with Pick n Pay, Walmart, and Woolworths to upgrade and rightsize their stores to improve their performance as anchors in our portfolio. On the European portfolio, we want to implement the Galleria Burgas transaction and complete the two solar projects. Then, as I mentioned before, we definitely are looking for new growth opportunities. Now to touch on some future projects. We have mentioned this one before.
Just to recap what we've done at Somerset Mall. The first key thing for us is to bring in Checkers as an anchor. We took the old food court, converted that to a Checkers FreshX. The remaining food, we actually converted to support the cinema, which we call Cinema Connect. As a phase two, we did the 5,500 sq m extension. We relocated Edgars as well as rightsize Game. The phase three, we will make a new link from the Pick n Pay entrance to the Woolworths entrance. We will add about 14,500 sq m. As you can see on the picture, it will actually create another racetrack, which improve the flow in the mall. What we will do is that will be one level of retail.
On top of that retail, we will actually do a parking level to actually replace the parking we lose, and there will be vertical connection from that top parking into the retail below. The tenant mix will focus on fashion tenants, home and furniture tenants, as well as casual and formal dining. This extension will further enhance the flow of the center, as I mentioned before, with the secondary track. The negative for Somerset was always the distance from when you started the Pick n Pay to the Checkers, which is not that far, but it feels quite far because you travel the same road. When you now have these loops, it actually improves it much better. After completion of phase three, the center will have a total size of 90,000 sq m.
It is quite accretive, and we are, as I mentioned before, looking at a potential return above 10% on this extension. This one hopefully comes to fruition this financial year. We've been working hard with the supermarket tenant to rightsize them. As you can see on this picture, what we are going to do when we rightsize them is form a new loop through the mall, as we call it a racetrack, and I think it will improve the flow within the mall. Obviously, if you bring in smaller tenants on that space you take back, as you can see on the picture, we will actually have an uplift in terms of rental income. One of the things that hasn't been working well at The Glen is the back stores.
We are straightening the lines and actually make the flows better, as you can see with the two green arrows on the plan. One of the other things we are looking at is also to improve the flow from the parking decks into the mall, and that you can see we are going to redevelop a straight line going through that parking deck into the back of the mall. That will be quite beneficial. Now, if we look at Croatia, we took about six years just to get our GUP approvals for this extension. There's a lot of tenant demand, specifically at City Center one East. What we will do is about 13,000 sq m. We will do it over two retail levels, and there will be some parking decks included as well.
This extension will make the mall a total size of about 60,000 sq m, and the project will be earnings accretive. We will most probably only start with this project in 2027. Now we can open the floor for some questions.
Thanks so much, Morné and Brett. Just to remind everyone about how we are going to conduct the Q&A. We do have either the chat or the Q&A box within the Teams link. I think if everyone asks the question in the same place, that would be better. I will just start off with Nazeem's question, though I think you did kind of answer it. He was asking for more detail around the Ellerine's, y eah, sorry, repurposing and re-tenanting there?
We are in discussions on those stakes. Obviously, I think it is a bigger price discussion than anything else. Obviously, we want to make a beneficial transaction for us, and they want the best price for them. It is a negotiation. But the deal must make sense for Hyprop, otherwise we do not need to do it. We control the majority stakes in both those assets that is known, which they have the stakes. The transaction will actually include all their directly held properties, not just those two, but there is not much more than in value outside of Canal Walk. It is all about discussions.
Okay, then specifically you asked if you can provide a pricing range?
We had ZAR 1, and they are substantially higher.
Okay, fair enough. In one of the earlier slides, we did have a look at the trading density growth numbers. It looked like May was a little bit lower than the rest of the year, at least the other months of the year. Can you give us some idea if that was maybe driven by increased consumer pressure, or was there something else that might have been driving that slight decrease?
Increase in trading. Just repeat your question.
You had, I think, 4% for January up until about April. Then in May, it came down to 1.5% or 1.7%, I think.
Yeah, I think May wasn't trading that well. I think there's the effect of the higher fuel prices and all those things coming through in the system. I think that is impacting the market. We actually had a Board meeting the other day where we actually got feedback that the retailers have seen not such a good period in May itself. So I think the impact is shown in our numbers as well.
Okay. Then maybe just going on a bit further there. Do you expect to see a lot more pressure from, say, especially the apparel retailers? Maybe a bit more pushback in terms of the renewal reversions at the end of this year, perhaps FY 2027 overall?
Maybe I must just clarify, there's no retailer that always push back on rentals. I think there is always open negotiation. The one thing I think we've been driving quite hard is actually improving our malls compared to our competitors. So I think although a lot of the apparel retailers are under pressure, in terms of our malls, they are still performing well. Therefore, it is a different discussion, I think, than other malls. But you are getting pushback, but that is a norm. But I don't foresee us actually having negative reversions in terms of those deals.
Okay.
I think there is also a lot of them that will actually look, and I think there was an announcement made where some of them will be closing down their non-performing stores—
Okay.
—to actually improve the performance.
None of those non-performing stores are in your portfolio? Okay. Francois du Toit has asked, "Is the 4.5% increase in collections a good indication of NPI growth in the five-month period? Why was SA NPI growth just 1% at the interim period, while collections had increased 5% based on the previous pre-close update in December?"
I think we did explain the increase in NPI growth in South Africa in the first half, which was influenced by some one-sort of credits that we received, particularly in the prior comparable period. That was the main driver for the low growth rate. I do not think you can just conclude that your collections translate directly into NPI growth, because some of those collections could be rent received in advance. That is more a function of the working capital cycle and how much you reduce your debtors or how much income you receive in advance. Yes, if your collections drop to, say, 80%, you probably start to see that your revenues are falling off. But we are not suffering from reductions in rentals. We just focus very heavily on the cash collections.
Okay. Can I just check inside the room if you have any questions here? Okay, no interest just yet. Okay. A question from Nick Wilson. He says, "Hi, Morné. One of my questions is about Edgars. You say you are reducing Edgars space in favor of retailers like JD Sports and Sportscene. Does this mean their stores are smaller, or does it mean that Edgars is exiting some of your malls?"
No, it is a question of getting them to the right size. Just to put it in context, when Edgars went in business rescue, we proactively actually reduced the space with Edgars, but we had some bigger stores. At Canal Walk, they were still on over two levels of about 12,000 sq m, so we have right-sized them to one level. Actually, interestingly enough, when we right-sized them at Canal Walk, the turnover from the space, which is half less than it was, is exactly the same. So you can actually just think what is the impact on the trading densities, which is very positive. Then similarly at Clearwater, there was about 12,000 sq m, so we right-sized that. Then, we have right-sized all of the stores. We did it at Woodlands, and the last one we are doing is at CapeGate.
It is not a matter of, I think they have also realized the space was too big. Therefore it actually improved their performance, but they are not exiting our portfolio. We actually have opened Edgars in Hyde Park as well as Rosebank subsequent to actually them exiting initially from those malls.
Okay. Second question from Nick Wilson, he has asked, "Has Walmart indicated whether it will be taking up more sites in your mall? If so, which ones are they looking at? Would this involve the conversion of Game stores?
I think that optionality is always there for Walmart. Obviously, we are in discussions with them, and it is under an NDA. Unfortunately, I cannot disclose exactly which ones they are looking at. But that is obviously an option for them to do it. And I think they are also trading in our malls quite well. One of the benefits for us when we did a deal with Game historically, except for the ones we have already done something like Somerset Mall, and watch that one we have done something. No, I cannot recall.
Not Clearwater.
What we have done with them is their leases expire in 2027, and they have got actually no options. So it puts us in a better position to actually negotiate deals with them. But we are quite excited for what we are seeing happening with their new stores.
Okay. Then maybe staying on that theme, we have got a question from [Busi Simelane]. She says, "The right sizing strategy has clearly been successful in improving trading metrics. Looking beyond these benefits, how is the underlying tenant base performing on a like-for-like basis? Going further, can management quantify how much runway remains for further right sizing opportunities? Are there any specific tenant categories, beyond Edgars and Pick n Pay, where they see scope to continue unlocking value?
I think we must just clarify right sizing. Right size is not always making it smaller. There is a number of our food anchors that is actually expanding space. We are expanding it on Table Bay Mall. We are expanding even at Canal Walk. We are expanding some of the food retailers, so there is demand both ways. I cannot give an exact number of how many is still in the pipeline.
Okay. Then Luqman Hamid has asked, "Could you provide color on renewal reversions?" I suppose probably for this period, and maybe looking forward as well.
I think something you must always look is, effort ratio gives you. Obviously these are averages, so you must take that into account. But looking at it, where our effort ratio is, it is actually give you scope for growth. We are, at the moment, at 8.1%, and I do think you could easily, on average, go to about 9%. So it actually give you scope to increase your rentals. The negative for us is what always put pressure on your rental levels is the full cost of occupancy. Something that we cannot manage is obviously rates, which has been increasing substantially. That is something we are working hard, but that expense level goes up, and then the only relief valve is sometimes your rentals. But it is very positive for us at this point in time, given where our effort ratio is.
Okay. Just considering the amount of solar PV work you guys are doing in South Africa, do you have a sense of what percentage of your energy needs will be covered by solar once you complete this set of CapEx projects?
I think your logic, it depends. I think the technology of solar improving as well, but you are talking a rough number about 30% of our total usage.
Okay.
I think where the big potential now lies is for what you call BESS, Battery Energy Storage System. I think there you could actually have a little bit of a further play to actually make your cost more efficient in terms of electricity.
Okay.
Just to add to that, the BESS system allows you to manage cost rather than supply—
Yeah.
—because you still have to charge the batteries, but it's when you use the batteries to mitigate the cost that you pay the Council.
Okay. Then maybe just moving on to Eastern Europe. You did mention some new opportunities there. Are you able to give guidance around which regions you guys are looking at right now?
We are looking at one new region, and we are looking at our existing new regions as well.
Okay.
But I can't, unfortunately, disclose.
Can you disclose maybe magnitude of transaction or range there?
Well, the last one was ZAR 122 million, and it is a little bit bigger than that.
Okay, that is helpful. Question from Nazeem Samsodien. He has asked, "Can you provide some numbers on the City East expansion?
Unfortunately, we do not have those numbers as yet. We are in the process with finalizing the design. When the design is finalized, obviously, then you can do a proper costing. So I have got a feel of what the numbers will be, a s I mentioned before, it would be quite accretive.
Yeah.
But I haven't disclosed any numbers to the market as yet.
Okay. Then maybe just speaking about the Eastern European, let's say, consumer. Obviously, there's been some support that comes from the government in terms of subsidies to reduce the energy costs. Do you have any concerns that if the war maybe just continues for too long, or the energy prices stay high for too long, that there'll be a drop-off in those subsidies? In which case, then maybe your centers might trade a little bit worse.
I think, in terms of the subsidies, let's maybe just clarify. During and after COVID, a lot of the subsidies remained, so I don't foresee them now dropping due to the war. I think the support is still there. Whether they can do it or not is a risk for us. But obviously what we are starting to do is also bringing in solar to actually mitigate some of that energy cost risk.
Just also, the subsidy is predominantly in Bulgaria. In Croatia and Macedonia, there's no subsidy, but we are able to enter into fixed price contracts with energy suppliers. You have a choice of supplier there, unlike here. And so we do look at that, and we do try and hedge some of those energy costs where it makes sense to do so.
Okay. Then in terms of the Eastern European trading densities, I know that at interim you had very strong numbers out of, I think it was electronics and jewelry. Have those dynamics changed at all given the global pressure on the consumer?
I do not have those numbers with me, so I am going to lie to you if I give you an answer.
Okay, so no category- specific numbers just yet.
I have not looked—
Okay.
—specifically at categories when we looked at these numbers. I think in our results presentation at the end of the year, we will definitely give those numbers.
Okay, awesome. That would be very helpful. We did have a pre-close previously that didn't have the most recent numbers, and that was a bit frustrating. Question from Luqman Hamid. He's asked, "Could you also provide color on funding the pipeline of developments and acquisitions?" I think this is across both SA and Europe.
I think given where our balance sheet is at the moment, there is gearing capacity, obviously. As I mentioned, these things are quite accretive. If you look at just in terms of phase three at Somerset Mall, our average cost of funding is 8.5%. You're looking at a development sub-10%. Potentially, it's beneficial. I don't foresee funding as a problem. Obviously, we assess each transaction, and one of the key things is always looking at our balance sheet. Obviously, where our share price is, there's also the option of vendor placements or accelerated book builds. That is always the most expensive way to raise money, but it's always an option at the moment, at least where our share price is trading.
If you look at the current situation right now, exactly where your price is, which would you prefer to use to actually raise capital? Coming to the market or vanilla debt?
Whenever you do equity, there's a few guys that always say it's like a small bird. It always tweets to be fed. Debt is always, at the longer term, better to do. But where the share price is definitely something we will consider.
Okay. Let me check the room again for any questions. Okay, here we go.
Hi, [Trent Ngoven] from Anchor Stockbrokers. Just commentary on your provincial exposure in South Africa. I think last time you reported vacancy numbers, the vacancy rate was quite elevated in Gauteng. Just comment on that. Are you still seeing the same sort of trend in Gauteng? If that's the case, what do you think is the driver behind that? Is it competition? Do you think there's oversupply of retail space in Gauteng compared to Western Cape, for example? Just a comment on that. Thank you.
I think Western Cape has got a lot more tailwinds than Gauteng. I think you have got semigration happening there. So I think there's a much bigger demand there. And I think our malls that's in Western Cape is quite good. But I can tell you what the teams have done in Gauteng. We have reduced the vacancy substantially. That's mentioned in the numbers, and you will see it actually now when we show you around here at Hyde Park and Rosebank Mall, and the teams have done excellent work. I think the big challenges was on certain levels and spaces in our malls, which was causing them not to trade at well, and we've addressed those. So I am quite confident that we will actually I see it sometimes as upside because as soon as you fill that space, it gives a kicker to your income.
It gives you opportunity to move tenants around. Having a little bit of vacancy, which is not very big in our portfolio of 3.3%, I think it is a good place to be. I think also one thing we have done actively, and you can see it in the offices, we reduced that from 30% to 7.7%. I think there is quite demand to actually fill up that 7.7% as well.
Cool. Any other questions in the room? Okay, question from Nick Wilson again. With the host of new tenants at Hyde Park Corner, like Marc's by Marc Jacobs, can we read into this that the Hyde Park sale is still off the table?
I think as we always have structured that transaction, we always structured it with an agterskot payment at the end because we actually know there is a lot of upside to be made out of Hyde Park. At this point in time, it is completely off the table. We are not marketing it to sell. We actually want to extract that value, and then we will make a decision at that point in time.
Okay. Then question for Brett. On slide 22, was the borrowing slide. You highlighted many refis for much lower price and looked very good. Can you give us your views on how you are thinking about positioning for either a hiking or cutting cycle by the SARB? Are you looking to increase the amount of debt that you have fixed, or you want to leave some stuff floating? Just want to get your sense around that.
We are increasing our level of hedges at the moment because of where we are in the cycle, but it's not always so easy. You still end up in a position that if you went and priced an interest rate swap today, you'd probably get it at 7.5%. Do you want to pay 7.5% from today, or do you want to do a cap at 7.5%? Which still leaves you with that variable exposure until you hit the cap. But we are tending, as you've seen, the percentage of debt, which your interest costs, which are hedged, has increased since we were there in December. We'll continue increasing that slightly. The other benefit we've got is, and we haven't presented the hedge maturity profile here.
Particularly in rands, we have a fairly consistent value of hedges maturing every quarter, w hich is what we've tried to do by design over the last couple of years. You're renewing your hedges all of the time, and it smooths the impact of a sudden change in rates on your total hedge book, because we might only be rehedging 10% or less of the hedge book in any one quarter. That's how we've approached it consistently for a couple of years.
Okay. Then maybe it's a bit sort of outlooky and very difficult to answer strongly, but I think many of the Hyprop specific risks are somewhat out of the base right now. Would you be willing to give some kind of market guidance as to what you think a realistic and sort of sustainable NAV/ ROE would be for the company over the next three to five years?
I don't think we would give any specific guidance on that yet.
Yeah.
It's much easier for us to guide in terms of what we can do with distributable income.
Okay.
But we do still aim to achieve a total return, including revaluation of the investment properties—
Yeah.
—and that's largely in the hands of the valuers. We can estimate what that will be based on our growth in net operating income—
Yeah.
—which drives the value. But if valuers start to change cap and discount rates, with the change in the overall risk environment, that's going to cause a big shift in some of those values.
Okay.
I think a negative in terms of our NAV per share was also when we got involved with the business and we were over-leveraged. We had to sort out the balance sheet, and you had to, unfortunately, issue a lot of times, shares at a discount to NAV, specifically in our DRIPs. That has a very negative impact on our NAV per share. Given where the share price has corrected, and I think we trading at a much less discount, obviously that gives us a benefit. If you raise money, you deploy it into something much better to actually use that lever. Our intention is, if we issue shares, is actually if you take that money and put into something else that gives you a kicker, then we will consider it.
Okay. Awesome. Are there any other questions from the floor? Does not look like it. I think we can finish here then. Do you have any parting words to give before we set off on the site visits?
I think we are in a very good space. Obviously, you come every year back and you actually think it is going to be a fantastic year, and then something happens. But it keeps us on our toes. I do think Hyprop is in a very good position. I think the team has done excellent work. If you take the progress we have done, Brett and the finance team has looked after our balance sheet. We have progressed well with all our initiatives to roll out. Solar, sometimes I think it is always taking a little bit longer than I would like it to take, but it is unfortunately due to regulatory approvals. It takes much longer. But the team has done excellent work, I think we are quite on the front foot. We have got capacity to grow the business. When we see opportunities to sell assets, we do.
Okay. Great, guys. Thanks