Melrose Arch is a mixed-use development that offers visitors fine dining and retail delights. Picture: Pam Golding Properties
JOHANNESBURG - Liberty Two Degrees (L2D), the listed real estate investment trust whose predominantly retail property portfolio includes Sandton City, Eastgate and Melrose Arch, aims to continue focusing on quality opportunities in the South African market.

Amelia Beattie, the chief executive of L2D, said yesterday that it would also seek to maintain industry-leading operational metrics and prudent balance sheet management to support future growth and returns. She said L2D’s first year since listing on the JSE was marked by many operational accomplishments as well as some headwinds.

She said these included the challenging macroeconomic and political environment, the impact of the PUT option exercised by Liberty, the closure of Stuttafords and the increase in Eastgate’s municipal valuation.

L2D declared a full year distribution a unit of 59.22cents in the year to December.

Beattie said the full-year distribution was lower than the forecast in the pre-listing statement, largely because of the interest differential on the PUT transaction, the impact of the Stuttafords closure and the unexpectedly high Eastgate municipal valuation “and its consequential impact on rates”.

Net asset value a unit grew to R9.86, which L2D attributed to good leasing progress and a decrease in arrears to 4.6percent, despite challenging trading conditions.

Total retail vacancies were 4.3percent at end-December, which included the Stuttafords vacancy of 3.1percent.

Office vacancies were 10.3percent, resulting in an overall vacancy rate for the portfolio of 6.4percent.

L2D was listed on the JSE in December 2016 and the value of its portfolio increased to R8.71billion in the reporting period from R6.06bn following the acquisition of a further 9percent of the Liberty Property Portfolio for R2.51bn.

Beattie said L2D’s shareholding in the co-owned Liberty Property Portfolio increased to 31percent from 22percent following the decision by Liberty Group to exercise the PUT option in June last year. But Beattie said their active asset management measures proved successful with the Stuttafords space now mostly let.

L2D management is forecasting a full year distribution a unit of about 60c for the 2018 financial year, with property income constituting 99percent compared to the 62percent forecast at listing.

However, this guidance was based on a number of key assumptions, including that L2D maintained a 31percent share of the assets that it co-owned in the Liberty Property Portfolio, no major corporate or tenant failures occurred and no dilutionary gearing was introduced.

Units in L2D dropped 0.35percent on the JSE yesterday to close at R8.47.