Hystead Montenegro

Location:

Montenegro

Project number:

49624

Business sector:

Property and tourism

Notice type:

Private

Environmental category:

B

Approval date:

04 Oct 2017

Status:

Disbursing

PSD disclosed:

04 Sep 2017

Translated version of this PSD: Montenegrin

Project Description

The provision of senior loans of up to EUR 59.67 million to Balfin MK Dooel, Delta M CG and Preduzece Delta City 67 d.o.o. - borrowers, three limited liability companies incorporated in FYR Macedonia, Montenegro and Serbia respectively. The borrowers are fully owned by Hystead Limited, UK and own three retail and entertainment centres, Skopje City Mall, Delta City Podgorica and Delta City Belgrade. The loan is a part of a larger financing package to the borrowers by the EBRD and the IFC.

Please refer to the links below for the project summary documents of the related projects in Serbia and FYR Macedonia:

PSD for FYR Macedonia | PSD for Serbia

Project Objectives

Repayment of existing loans of the borrowers which will result in an improved and more sustainable capital structure and financing upgrades and/or expansion of the retail assets.

Transition Impact

The Transition Impact is expected to be achieved through the following sources:

Setting standards: the company will aim to certify the retail assets under an international sustainability scheme. The company is an experienced operator of retail assets with an established
commitment to sustainability, and may also contribute to transferring best practices in general (such as reporting and company-specific sustainability targets) to its new operations in south-estern Europe (SEE).

Skills transfer: The company will implement a training programme through its management team, building on its existing operations and training programmes in South Africa, and by setting up
cooperation with local educational institutions to support their newly developing SEE operations.

Client Information

DRUSTVO ZA TRGOVINU I ZASTUPANJA DELTA M CG Delta M CG is fully owned by Hystead. Hystead is in turn owned by Hyprop Investments Limited (60 per cent) and PDI Investment Holdings (40 per cent). Hyprop is one of Africa's leading specialist shopping centre real estate investment trust (REIT) listed on the Johannesburg Stock Exchange. PDI is a Mauritius-registered investment company, with majority owned by Louis Norval, an independent non-executive director of Hyprop. The shareholders set up Hystead to expand their portfolios into SEE, which is in line with Hyprop's strategy to acquire or develop high-quality, income producing retail centres in emerging markets.

EBRD Finance Summary

EUR 59,670,000.00

Total Project Cost

EUR 329,900,000.00

Environmental and Social Summary

Categorized B (2014 ESP). The implementation of the project involving operation and expansion works of the existing retail centres will result in limited and localised environmental impacts, which can be mitigated or prevented by adhering to good international construction practice and standard environmental and social risk management. The environmental and social due diligence (ESDD) for the project included a review of the completed environmental and social questionnaire and desktop study on Hystead and Hyprop, including Hyprop's 2016 Integrated Annual Report and the IFC's environmental and social review information on the project (the IFC carried out a site visit for the project in 2017).

The Bank's ESDD found that the company has adequate environmental and social risk management capacities to implement the project in accordance with the Bank's performance requirements (PRs). Hyprop, at the group level, is publicly committed to sustainability through the publication of its environmental performance in their integrated annual report, guided by the global reporting initiative and standards set by the FTSE4Good Emerging Index, of which Hyprop is a constituent. It aims at greater corporate transparency on environmental, social and governance considerations.

Furthermore, the group is a member of the Green Building Council of South Africa (GBCSA) and has committed to manage and operate its property buildings in an environmentally sustainable way.
The group's sustainability commitment and environmental and social risk management policy and procedures are to be transferred to the project's specific retail centres expansion and operation
by assigned qualified management teams. The retail centres have environmental management systems in place to address waste, energy and water consumption. The company has also carried
out required environmental and social due diligence for each asset under the project prior to the acquisition. The company will also monitor each retail centre's performance including environmental
and social one in due course.

While the general contractor of the expansion work at the retail centre in Podgorica, Montenegro, has not yet been selected, the company will require it to have an environmental, health and safety risk management for the construction work through the contract. With regard to human resources and health-and-safety policies, the retail centres under the project have recently been integrated into the Hyprop portfolio and are still in the process of integration. The strategy is to ensure that their human resources and health-and-safety policies and procedures are in line with Hyprop's group policies; thereby ensuring that equal opportunities, non-discrimination and health-and-safety management is addressed in due course. Third-party suppliers are contractuall required to have staff properly trained and equipped by personal protection equipment.

The retail centres under the project are in environmental legal compliance and have implemented a variety of energy efficiency measures through the project design and operational measures, through the use of Building Management System (BMS) including automatic control and optimization of the building's mechanical and electrical equipment work such as ventilation, lighting, power systems and managing of energy demand. In addition, the retail centre in Skopje has installed solar collectors of 36 solar panels for hot water supply. The retail centres' recycling effort is focused to separate collection of cardboard packaging, paper and plastic. These materials are collected and sold for recycling. Other general waste is removed by a contracted municipal company for further disposal at landfills. Hazardous waste is collected separately by a licensed company. Both the EBRD and the IFC are considering supporting the retail centres' energy and water use efficiency performance enhancement through technical assistance activities.

An Environmental and Social Action Plan (ESAP) has been developed to address adoption and implementation of the group-level sustainability policy at the project and retail centre
level, performance requirements' compliance at the expansion construction work, adoption of formal human resources and occupational health-and-safety policies at the retail centre level in line with the group's relevant policies in the area of equal opportunities and non-discrimination, career development and training, remuneration policy, an employee grievance mechanism and
occupational health and safety. Furthermore, the ESAP includes Life and Fire Safety (L&FS) issues to undertake a risk-based review of the L&FS operational practices of the existing retail centres
as well as to review Podgorica expansion's design and certify that the project complies with one internationally recognized L&FS codes such as U.S. NFPA as defined in EBRD Performance
Requirement 4 and the L&FS Section of the Worls Bank Group General Environment, Health and Safety Guidelines. Where gaps are identified, a life and fire safety corrective action plan will be
developed and implemented in accordance with agreed timeline.

The Bank will monitor the project's environmental and social performance including the status of the implementation of the ESAP by reviewing the annual environmental and social report as well as site visit if required and appropriate.

Technical Cooperation

TC with consultant support is provided under existing and approved Green Economy Transition TC Frameworks applicable for corporate projects and clients in Western Balkans. The consultant
will conduct sustainability pre-certification assessment and identification and assessment of cost effective opportunities in all three assets considered for the Project. In addition, the consultant will
conduct a training to the Company's technical and facility management staff on practices leading to more resource efficient operation and on the formal sustainability certification.

Company Contact Information

Pieter Prinsloo
pieter@hyprop.co.za
+27 11 447 0090
www.hyprop.co.za

Business opportunities

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