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Quality assets underpin Liberty Two Degrees' solid 2019 performance

24th February 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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Sustainable trading density growth of 3.6% for the year ended December 31 was reported for South Africa-focused retail-centered real estate investment trust (Reit) Liberty Two Degrees’ (L2D’s) retail portfolio, with Sandton leading at 9%, up from 4% in 2018.

This, the company said on Monday, was supported by the company’s “underlying quality of assets”, which was supported by “the drive and passion of the team in the implementation of the key strategic initiatives” that led to a strong operational performance.

L2D’s retail vacancies remained low at 2.3% and below the South African Property Owners Association (Sapoa) benchmark of 4.2%.

CEO Amelia Beattie said this improvement was mainly driven by retail leasing initiatives which saw leases covering 149 101 m² being renewed during the period, and a further 37 931 m² in new tenant leases being concluded across the portfolio.

In turn, she said this reflected “healthy demand for rental space at the centres”.

Overall, office vacancies increased marginally to 10.2%, up from 9.8% as at June 30, 2019.

The portfolio’s office letting remains strained in the absence of economic growth, Beattie said on Monday.

Commenting on the results, she noted that the period under review had been characterised by “positive distribution growth and a good trading performance as a result of active management”.

Beattie added that the implementation of L2D’s building blocks continued to show traction in creating experiential spaces, which had a resultant positive impact on customer experience and stakeholder value.

“Our operational results are testimony to the quality of our portfolio, as well as the solid fundamentals supporting [the company’s] asset base in a challenging environment”.

L2D’s loan-to-value (LTV) remains conservative at 16%, with 75% of interest rate exposure being hedged as at the end of the period. The business achieved an interest cover ratio at 4.68 times for the period.

Beattie said the company’s targeted long-term LTV level of 35% left headroom for potential acquisitive growth, while mitigating risk in a strained economic cycle.

“Costs were well managed across the portfolio during the period; however, municipal and utility costs increased substantially ahead of inflation and remain a challenge,” L2D FD José Snyders said.

Touching on the environment, L2D implemented a no-plastic-shopping-bags policy across its malls from January 1, this year.

This is in line with the company’s “Good Spaces” commitment to ensure minimal impact on the environment and to achieve its NetZero target by 2030.

The Aquaponics Farm District at Eastgate Shopping Centre was also launched and uses smart new technologies to provide sustainable solutions to food production and security to patrons of the centre, as well as the broader Johannesburg region.

“To ensure the customer experience journey remains strong, L2D will make targeted investments in initiatives to remain at the forefront of retail evolution,” Beattie commented, adding that “tenant experience remains key through an optimised rental base translating into sustainable operational performance”.

L2D expects its 2020 distribution growth to be similar to that of 2019.

The company’s commitment to the portfolio’s overall NetZero target by 2030 will see L2D deliver a NetZero waste target by the end of 2020, Beattie confirmed.

Additionally, the L2D board has declared a final dividend of 31.12c a share for the second half of the 2019 financial year, bringing the total distribution declared to 60.43c a share, being 0.7% ahead of guidance.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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