CAPE TOWN - South African real estate investment trust Liberty Two Degrees (L2D) is continuing to seek acquisitions despite the weak property market .
The group’s portfolio includes Sandton City, Nelson Mandela Square and Eastgate Shopping Centre.
Yesterday it reported that it had lifted its distribution per share marginally and in line with guidance to 60.43cents in the year to December 31, from 60c the previous year.
The group’s 100percent South African portfolio - focused on shopping malls, but including offices and hotels - was valued at R10.27 billion at the year-end (2018: R10.15bn), and net asset value per share increased 2.1 percent. This included acquiring an additional stake in Botshabelo Mall for R24 million.
Retail vacancies were low and trading density had shown positive growth. Following the sale of Century City offices, pending transfer, R123million of property was held for sale. Overall portfolio valuations remained flat compared to the prior year.
The group aimed to be the leading precinct focused Reit in the country, said chief executive Amelia Beattie. She said in a presentation that these were “good, strong results,” in an environment that was “tough and stormy at times”.
The economy was expected to remain challenging, she said, as evidenced by weak consumer demand, but a conservative loan-to-value ratio at 16percent provided a buffer. Balance sheet capacity and good operational performance were “key differentiators” in a difficult trading environment, she said.
Net property income (NPI) increased to R693.6m from R589.1m, which included a full year relating to the assets acquired on November 1, 2018. NPI growth was mostly driven by good rental growth and retail space previously in fit-out, that was now trading. Average retail trading density growth of 3.6percent was reported, she said.
The trading density at Sandton City remained strong at 9percent, driven mainly by luxury retail store trading density growth.
Good retail leasing initiatives resulted in leases covering 149101m2 being renewed (49472m2) and a further 37031m2 (52557m2) in new tenant lease agreements concluded.
This reflected a healthy demand for rental space at the centres. Office vacancies at 10.2percent remained challenging to fill, said Beattie.
Retail vacancies were at 2.3percent, and only 0.4percent at Sandton City.
The gross cost-to-income ratio improved to 31.8percent (2018: 35.8percent) due to cost initiatives. Profit from operations was up 15.12percent from the prior year.
Looking forward, L2D intended to continue to invest in its assets and execute on the experiential retail strategy while committing to well-defined sustainability targets.
A host of new concept stores, while a host of experiential, theatre and art concepts helped pull shoppers into the malls over the past year, said Beattie.
Some R25m was spent over the year on sustainability initiatives, according to a programme that expended to 2039 and involved cutting energy, water and waste, she said.
L2D’s distribution guidance for the 2020 full-year distribution was for it to be equivalent to 2019.
L2D’s share price increased by 3.25percent yesterday afternoon on the JSE, a strong rise given the JSE All Share Index was down 4percent at the same time. Later the share closed at R6.20.