Liberty Two Degrees property income slides through pandemic, Newsline

CAPE TOWN – Liberty Two Degrees’ (L2D) net property income fell 45.6 percent to R377.3 million in the year to December 31 due to rental relief to tenants through the pandemic, suspended trading of hotels, less parking revenue and rising provisions for tenant arrears.

The full year distribution slid to 32.33 cents from 60.43 cents in 2019.

Amelia Beattie, the chief executive of the South African, precinct focused, retail-centred Reit said yesterday that footfalls fell 30 percent for the year, but as pandemic restrictions eased, footfall improved in the fourth quarter to nearly double the prior two quarters.

“The real estate industry remains under pressure. After a year unlike any we have faced before, we remain confident in the long-term prospects of L2D,” she said.

Reitway Global chief investment officer Garreth Elston said it was likely to be a “long hard, multi-year slog” for Reits such as L2D with big shopping mall and office portfolio’s to recover to pre-Covid-19 levels, but he commended L2D for at least making a distribution.

He said confidence needed to be restored among consumers to feel safe from Covid-19 while walking in big enclosed malls, which would be aided by a successful Covid-19 vaccination roll-out, and barring tax surprises in this week’s National Budget.

L2D’s tenant arrears ballooned to R96.4m at December 31, compared with R30.8m at December 31, 2019, so provisioning for credit losses increased by a similar level.

The value of the 100 percent owned South African properties fell 15.8 percent to R8.5 billion after valuations were cut due to discounts on current year rentals and the rebasing of certain leases as well as revised growth assumptions.

Beattie said they aimed to fulfil a vision to be the leading South African precinct focused, retail- centred Reit and to delivery sustainable growth through better financial performance, digital transformation and execution of asset master plans.

The balance sheet remained healthy, with loan-to-value of 20.5 percent versus 16.1 percent in 2019.

Financial director José Snyders said the approach to partner with their tenants through the difficult period assisted their collective sustainability.

“Following a difficult first half, this strategy enabled distributions to be paid from a progressive improvement in rental collections in the second half, with lower than anticipated tenant failures and avoiding an associated impact on vacancies,” he said.

Retail occupancies remain high at 95.3 percent, and post year-end, with new letting, the level increased to 96.8 percent.

L2D’s portfolio was the first in South Africa to receive Green star ratings for all its retail assets, with Sandton City receiving a world-leading 6-star rating.

Sandton City’s turnover for the month of December 2020 was marginally down 1.5 percent compared to December 2019, attributed to high demand for luxury brands at the centre’s Diamond Walk, highlighting the relevance of quality super regional centres that addressed demand for an experiential offering while being optimally located.

At this stage, a material impact on property valuations from the Ster-Kinekor Theatres voluntary business rescue from January 27, was not anticipated.

“Our risk management remains strong and we believe we have the necessary management actions in place to continue to manage our risks sufficiently,” said Snyders.

The share price traded 0.41 percent lower to R4.83 yesterday morning, 24.6 percent down from R6.02 at the same time last year.