L2D records R1.4bn loss from its coronavirus-affected malls and shopping centres
CAPE TOWN - Liberty Two Degrees (L2D), owner of Eastgate Shopping Centre, Nelson Mandela Square and Sandton City, made a R1.4 billion loss in the six months to end June from a profit of R244.2 million previously after the Covid-19 pandemic shut restaurants, stores and gyms and reduced the value of its properties.
The value of the group’s properties, which includes hotels and offices, fell 14.8 percent to R8.7bn over the six months. The interim dividend was deferred (29.31 cents in 2019), but a year-end dividend would be considered, directors said in results released yesterday.
“Our independent property valuers have decreased the portfolio value by 14.8 percent compared to June 30, 2019, due to the impact of Covid-19 by the decrease in rentals for the current year, the negative reversions and lower growth assumptions for the periods forecast, as well as an increase in vacancies and the time required to re-let vacant space,” the group said
The valuer also applied more conservative valuation metrics. Financial director José Snyders said it was a challenging period for the group.
“The Covid-19 pandemic has had far-reaching consequences beyond the spread of the disease itself, as customer sentiment and behaviour continue to echo the uncertainty of the pandemic. We expect our performance to be impacted for the remainder of the 2020 financial year,” he said.
Focus for the remainder of 2020 would be on rebuilding the business by working with tenants to support the resumption of safe trading in the short term, and positioning the business for sustainable growth thereafter, said chief executive Amelia Beattie.
L2D’s revenue and net property income fell by 15.8 percent and 40.4 percent, respectively, in comparison to the prior period, with operations significantly impacted by decreases in footfall as shopper behaviour changed with the advent of Covid-19 and subsequently the national lockdown and restricted trading periods.
Rental relief and support had been provided in line with the Property Industry Group guidelines. Relief offered was structured in favour of the level of impact on tenants’ ability to trade. Rental relief negotiations were ongoing, but difficult, as many of the Covid-19 implications for tenants were evolving. “L2D is still in evolving negotiation with the restaurants who are requiring a different approach stepping forward together,” Snyders said.
Currently, 85.4 percent of the group retail gross letting area was trading, and gyms and certain restaurants remained closed. The closure of hotels in the Sandton City precinct, in line with the lockdown restrictions, had impacted earnings negatively.
The Sandton Sun had partially reopened for business travellers, but was trading at 10 percent occupancy.
Interest expense increased 11.3 percent from June 30 as a result of additional term debt that was drawn down in November 2019 and March 2020. The group loss included negative fair value adjustments of R1.5bn.
L2D was working with Edcon business rescue practitioners on two acquisition deals currently in negotiation.
The share price was untraded at R5.10 yesterday, down 27 percent from R7.05 a year ago. The SA Retail Property Index was down 46 percent over the same period.