Liberty Two Degrees relies on its diversification to survive pandemic
More than 70% of gross lettable area of listed landlord’s malls have returned to trading
Liberty Two Degrees (L2D), the listed landlord that owns a quarter of Sandton City, says its diversified portfolio is helping it manage the effects of the Covid-19 pandemic.
The company, which owns a portfolio worth about R10.3bn, released a trading update on Friday.
“Management’s focus is on implementing strategies that position the business first for stability and sustainability and secondly for growth within the new future of retail,” it said.
In line with the government’s guidance, its malls closed partially on March 27 with only essential services trading for the five-week period at level 5 of the lockdown.
On May 1, some of the stores opened in line with level 4 conditions, and more than 70% of the gross lettable area of their malls have since returned to trading.
The Promenade Shopping Centre in Mitchells Plain benefited from 78% of tenants trading. Higher-end centre Nelson Mandela Square, with a higher proportion of restaurants, has 18% of tenants trading.
L2D CEO Amelia Beattie said some of its tenants have asked for rent relief.
L2D abided by the guidelines of the Property Industry (PI) group, which includes a collective of three major representative real-estate bodies: the SA Real Estate Investment Trust Association (SA Reit), SA Property Owners Association (Sapoa) and SA Council of Shopping Centres (Sacsc).
It came up with a R2bn relief package to provide industrywide and nationwide assistance for those retail tenants hit hardest by complying with the government-imposed halt in commercial activity.
Beattie said factors that would be considered for the commercial assistance L2D was providing included the size and cost of operation and the company’s assessment of the estimated level of impact, given its understanding of the tenant’s operations and requirements of each mall and its broader portfolio.
“This does not however translate into turnover-based rental, but we are trying to find the balance between tenant and landlord in achieving a fair and sustainable outcome,” she said.
Rental collections based on full amounts due totalled 38% in April 2020. May collections received at May 25 rose to 45% of current billing.
“We expect this to increase based on the rental relief measures and with tenants now able to trade since the easing of the lockdown. Collection rates can be better assessed at half-year once we have processed the rental adjustments in June,” she said.
Rental collection rates were affected by L2D’s 84% exposure to retailing, the sector affected worst during the lockdown, with hotels and convention centres.
The collection rate was expected to improve in the second half of the year once tenants’ trading starts to normalise.
L2D said high-end fashion group Prada closed its store in Sandton City’s Diamond Walk.
“Prada has taken the decision to optimise its retail network, focusing its strategy on markets that do not include SA,” Beattie said.
The store occupied 799m² of the centre’s gross lettable area.
“We are engaging with other suitable brands. The intention is to subdivide the Prada premises for new brands,” said Beattie.