JSE-listed real estate investment trust Growthpoint Properties says its retail portfolio has been hit hardest during the Covid-19 pandemic.

Since South Africa declared a Level 5 lockdown, the company has been grading the retailers at its properties according to the severity of the impact of the lockdown, as well as their size, and the company has been offering assistance accordingly.

Retailers selling perishable goods, and unable to make up those sales, are among the retailers in the highly impacted category.

Based on this grading, Growthpoint’s retail portfolio comprises 27% listed non-essential retailers, 22% essential and fully trading, 18% medium and large unlisted non-essential retailers, 16% essential and partially trading, 9% highly impacted small, medium-sized and microenterprises (SMMEs), 7% moderately impacted SMMEs and 1% State-owned enterprises/government.

Growthpoint says it is working with property industry association PI Group to provide retail tenant assistance and relief measures to sustain severely impacted retailers throughout the lockdown.

The company has provided retail rental relief to nearly 1 500 SMMEs, to the tune of more than R200-million, of which 694 are in the highly impacted category and 800 in the moderately impacted category.

Growthpoint is in the process of finalising rental relief for all other medium, large and listed retail tenants for April, which may still reflect in May, pending agreement conditions.

Further, Growthpoint rejected an offer from its top five fashion retailers to pay only 20% of rates and rentals for April. Together with the PI Group, Growthpoint has approached government to mediate the matter.

The company confirms that it is making progress on negotiations with four of the five retailers and, as such, it expects retail collections to improve.

The PI Group is liaising with government to agree on a phased approach to reopen shopping centres safely.

“Non-discretionary shopping patterns are expected to start normalising, but we are aware that the way some people shop has shifted during this period. A protracted recovery is projected for tenants in the restaurant, entertainment and travel industries.

“Our figures reveal a massive spike in retail trade towards the end of March as people stocked up on essential items in preparation for the hard lockdown. Shopper numbers across our portfolio were about 50% to 60% of normal counts for April 2020,” Growthpoint reports.

The company further states that convenience and community shopping centres are proving to be more resilient with people shopping locally in their neighbourhoods during the lockdown and generally not travelling to larger malls.

At the company’s lower living standards measure centres, which serve mainly shoppers that rely on public transport, footfall decreased by 90% in April.

“As ever, we remain focused on retaining tenants. Before the Covid-19 crisis, the retail sector was facing many headwinds with tough renewal negotiations and this is likely to continue.

“On April 29, fashion retailer Edcon went into voluntary business rescue. Our Edcon exposure (following the group’s sale of stationary subsidiary CNA) was 88 000 m² and Jet accounts for about 20 000 m² of this space,” Growthpoint explains.

If there is interest from third parties to acquire Jet, or other parts of the business, that may result in a positive outcome for our exposure.

Growthpoint says that for the Edgars stores within its portfolio, the company is investigating options to subdivide that space and introduce a second supermarket anchor, where possible, which is a costly exercise.

In the interim, the entire industry has received an offer from the Edcon business rescue practitioner to pay only turnover rental for the next few months, which the company is evaluating.

OTHER PORTFOLIOS

In the company’s office portfolio, Growthpoint is still considering rental deferments for its tenants. Travel industry tenants, for example, have been profoundly impacted.

The company has not received requests from tenants for closure at this stage.

“In most instances, we have provided partial or full rental deferments for April and May with recoveries over three to six months. A handful of tenants, such as coffee shops in office parks, have negotiated discounts. Where appropriate, we extend leases in return for rental deferments.

“The feedback from our office tenants is mixed. Many businesses are desperate to get back to their offices as they are missing the contact and collaboration afforded by their workspaces. Others have adopted technology and adjusted well to remote working, which could result in decreased space needs in future.”

Similarly, no requests for lease termination has been received for the industrial portfolio, although some tenants have been provided rental relief and continue to be profoundly impacted.

NATIONAL RELIEF

While Growthpoint is implementing strict cost-saving measures and secured a R750-million bank loan, with a further R900-million under negotiation, the company’s executives managed to set some funds aside for humanitarian support during this time.

Growthpoint’s group CEO, its South African CEO and group FD have personally pledged one-third of their salaries for three months to the national Solidarity Fund.

The chairperson of Growthpoint and several nonexecutive directors are also donating a third of their quarterly board meeting fees to the fund.

The company is also involved in various corporate social responsibility programmes, including with child feeding and educational organisations Christel House, Protec, Education Africa, Botshabelo, Ntataise Lowveld, Genesis Safe Place and Rise Against Hunger.