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Business|Environment|Rental
Business|Environment|Rental
business|environment|rental

L2D portfolio recovering from Covid-19 blow

28th September 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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While the reopening of the South African economy has contributed to a recovery in trading conditions for Liberty Two Degrees (L2D), the company’s operational performance for the first six months of this year was significantly impacted by the Covid-19 pandemic and the implementation of a national lockdown.

The reopening of the economy saw a marked improvement in footcount at L2D’s centres, with most tenants now having opened for trade.

The recent move to lockdown Alert Level 1 further relaxes restrictions on movement and economic activity and will support the ongoing recovery of the economy, L2D comments.

Additionally, the ability of restaurants to operate at increased capacity and the opening up of international travel from October 1 will provide additional impetus to the South African economy and assist in the recovery of L2D’s hospitality portfolio.

In terms of liquidity, L2D remains well capitalised, with an unchanged group loan-to-value (LTV) ratio of 21.7% and unused revolving credit facilities (RCF) of R400-million.

The latest weekend footcount across the portfolio is at 80% of 2019 levels, with top performers being Sandton City (85%), Midlands Mall (88%) and Eastgate (97%).

The monthly portfolio footcount at August 31 improved to 68% of the comparative 2019 level and continued to rise with a 10% increase from July. The number of tenants now trading as a percentage of retail gross lettable area (GLA) at August 31 was 93.1%, which L2D says “represented a good improvement from the 85.4% reported at June 30”.

In terms of collections and rental relief, L2D notes that rental collections are based on the full amounts due and before any rental relief has increased to 74% at August 31.

“This is an improvement from the levels last reported at April (38%) and May (45%),” the company says, with respective collections percentages for June and July being 65% and 72%, respectively.

L2D explains this improvement is as a result of the further finalisation of rental relief negotiations, as well as almost all its tenants now trading.

“We expect the total arrears position to improve by year-end from the 67.7% reported at half-year, as we close out all the rental relief negotiations.”

In this regard, rental relief negotiations are ongoing and good progress has been made in concluding negotiations with listed clothing retailers and major national and international retailers, L2D reports.

However, it says the impact of the uncertainty in the environment following Covid-19 remains of concern.

“L2D continues to work with all our restaurant and small and medium-sized enterprise (SME) tenants to get them open and back to business as soon as possible as these sectors were severely impacted and required additional support,” the company states.

Regarding the company’s monthly turnover, the portfolio has seen a “gradual improvement” in turnover as the lockdown levels have been eased, allowing retailers to resume trading and drawing customers back to L2D's retail environments.

L2D’s Botshabelo Mall, in the Free State, has recorded turnover growth over the most recent three months, and this strong performance is “as a result of the community nature of the mall and the relatively smaller impact from Covid-19 on both tenants performance and footcount”.

There have also been good improvements in trading at the other centers with Promenade and Midlands Mall only 18% and 21% off 2019 levels, respectively.

The turnover at the super-regional centres is about 30% below the comparative 2019 periods as these malls have been severely impacted by the Covid-19-induced lockdown, and exposure to restaurants and hospitality.

However, the recent move to Alert Level 1 “should lift turnover levels further”.

With regard to vacancies, the retail portfolio has shown some resilience with a vacancy of 3.8% in August.

Office vacancies increased from 10.1% in June to 12.2% in August and is largely owing to the sale of the fully let Century City office.

The work-from-home trend continues to negatively impact the office sector, L2D laments, noting that the South African Property Owners Association vacancy rate for the second quarter stood at 12.3%, the highest in 16 years.

Accordingly, there has also been a slight increase in vacancies across the portfolio from 5.3% in June to 6.1% in August.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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