Trade improvement has been slow since the Level 3 lockdown restrictions were implemented and JSE-listed real estate investment trust Liberty Two Degrees (L2D) says there has been “a severe impact on the second quarter and consequently the first half of the 2020 financial year".
As a result, the company says it is likely that its distributable earnings for the six months will be between 40% and 55% lower year-on-year.
Owing to this decline and the prevailing uncertainty resulting from the Covid-19 impact, the board has elected not to pay an interim dividend, but will instead be considering the payment of a final distribution for the full year.
Consequently, L2D has “reasonable certainty” that, given the distribution deferment decision, the interim distribution per share will be 0c compared with 29.31c for the six months ended June 30, 2019.
Further, independent valuations of the property portfolio for the interim reporting period are currently being prepared, and the company expects these valuations will be negatively impacted on by the decrease in rentals for the current year owing to the impact of Covid-19, the potential for negative reversions and lower growth assumptions for the periods forecasted, as well as an increase in vacancies and the time required to re-let vacant space.
Several of the company’s tenants are still unable to trade or are still under restricted trading conditions which include restaurants and tenants in the hospitality sector that are most severely impacted.
As such, L2D estimates that the portfolio value will have declined by between 10% and 20% when compared with the six months ended December 31, 2019.
L2D’s results for the six months will be published on July 27.