Real estate investment trust Liberty Two Degrees (L2D) has highlighted the importance of agility in how swiftly the company is able to adapt to new ways of thinking and working going into 2021.
In a pre-close investor update, the company states that the impact of the Covid-19 pandemic on its customers, tenants, people and performance has necessitated an agile response and resulted in new ways of working and thinking.
The focus is on strategic value drivers including the customer experience, tenant experience, people experience, capital and risk management strategy, financial outcomes and the good that the company does.
L2D further explains that, while the current conditions present a number of threats to the company’s retail-focused portfolio, a significant portion of the portfolio remains underpinned by basic property fundamentals.
These include letting space to good-quality tenants; collecting rentals, but keeping sustainability in mind through rental relief packages; keeping the environment safe and secure; maintaining properties to retain the quality fabric; paying property expenses; and driving efficiencies to reduce costs.
L2D has been focusing on cost control and safety and security of all of its malls for quite some time, and achieved a Covid-19 global compliance certificate issued by Safe Shopping Centres earlier in the year.
The company is also continuously looking for new ways in which to enhance its experiential offerings, but the core business remains the key indicator of recovery through tracking foot count, vacancies, collections, turnover growth and occupational health and safety.
There has been an improvement in all of these indicators, apart from the portfolio vacancies, since the last operational update issued on September 28. Some good leasing activity during the period has, however, improved the portfolio vacancy rate when the pre-lets are taken into account.
The L2D footcount in October recovered to 81% of the levels recorded in October last year, with the top performers being the Midlands Mall, at 98% recovery and Eastgate, at 96% recovery.
“We are pleased to note the continuing positive trend in monthly turnover with September's turnover for the portfolio at 83% of the comparative September 2019 turnover. The 12-month rolling portfolio turnover at 30 September 2020 was 81% of the comparative 12-month rolling portfolio turnover in 2019,” explains L2D.
The company adds that the portfolio has seen a steady improvement in turnover as the lockdown levels had eased, allowing retailers to resume trading and drawing customers back to retail.
The top three performing categories in the third quarter, from a turnover growth perspective, were luxury brands, groceries and technology. Luxury brands contribute to about 8.1% of L2D’s portfolio, but only account for 0.9% of gross leasable area.
L2D advises that its Sandton Sun hotel is currently the only hotel in the portfolio that is operational and has been showing steady growth in occupancy rates. Its occupancy rate was at 30.9% in September, up from 20.9% in August.
Other hotels in the group’s portfolio remain closed until the hotels reach viable levels of operation, while their leases also remain suspended with no rental payable until the hotels reopen.
The Sandton Convention Centre has been open in November for Presidential conferences, but will be closed again soon until the number of people allowed in one venue increases in line with legislation.
L2D has recorded an increase in vacancies across the portfolio from 6.1% in August to 7.6% in October. The company’s retail vacancy increased to 4.7% in October, compared with 3.8% in August, while the office vacancy increased to 15.1% in October, from 12.2% in August.
The company reports that rental collections increased to 84% at the end of October, compared with 74% n August. L2D expects total arrears to improve as it closes final rental relief negotiations by the end of the year.
L2D remains well capitalised with a slightly improved group loan-to-value ratio of 20% in October, following the repayment of part of a redraw facility. The company still has R400-million of unused facilities available if need be.
The company will release its results for the year ended December 31 on or about February 22, 2021.