Retail-focused real estate investment trust (Reit) Liberty Two Degrees (L2D) has declared a distribution of 29.3c apiece for the six months ended June 30, in line with expectations and despite a challenging environment.

As a result of the acquisition of additional undivided shares of R2.5-billion in the Liberty Property Portfolio pursuant to Liberty Group exercising its put option, L2D’s robust and 100% local direct property portfolio was valued at R8.7-billion at the end of the period.

This was up from the R6.1-billion value recorded as at June 30, 2017.

L2D recorded a growth in profit from operations, before interest income and fair value adjustments, to R255-million, from R158-million in the prior comparable period, despite the challenging economic environment, said L2D CE Amelia Beattie.

“Our income producing assets are underpinned by strong property fundamentals resulting in the distribution declared, which is now derived from net property income, and no interest income as per the previous comparative period.

“Our active asset management initiatives and leasing activities, specifically those relating to filling the Stuttafords vacancies, have enabled us to reduce the overall vacancy rate to 6% as at June 30, compared with 6.4% as at December 31, 2017. Taking into account the pre-let deals, the overall vacancy reduces to 4.4%,” she noted.

Retail vacancies remained unchanged from the December 31, 2017, period, at 4.3%. Including the pre-let deals, the vacancy would be lower at 1.8% as the new tenants only start trading towards the end of the year.

The office vacancy decreased to 9.7% from 10.3% as at December 31, 2017, whereas when taking the pre-let deals into consideration, the office vacancy is lower at 9%.

CORPORATE MOVE

In response to market conditions, L2D in May announced its intention to convert to a corporate Reit, internalise the management company by acquiring all issued shares from Liberty Holdings for R300-million, acquire additional undivided units in Liberty Property Portfolio – increasing the portfolio’s value by R1.2-billion, and cancel the Liberty put option.

This proposed transaction seeks to more closely align L2D to investors and respond to factors that inhibit the full achievement of L2D’s objectives and growth targets as originally envisaged. 

Beattie said the transaction will restore positive sentiment in line with the company’s strategy to unlock and deliver performance to investors, better aligning unitholder value to the inherent value of L2D’s net asset value.

A general meeting will be held on August 28 for the approval of the transaction by unitholders. All other approvals have been finalised.

It is expected that the transaction will be effective October 1.