The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko
JOHANNESBURG - Listed property has had a dismal year so far. The index delivered a total return of minus 18percent and was dragged down mainly by the Resilient stable companies, which lost between 40 and 60percent of their value. Rand hedges in this index bore the brunt of the stronger rand and lingering concerns on how Brexit will play out.

After years of stellar performance, it is also not uncommon for a sector to consolidate and take a breather. After all, if you invested R100 in the Listed Property Index ten years ago, you will now have R421 (dividends included), still the best performing asset class in South Africa, even after the massive drop.

Liberty Two Degrees (L2D) is the listed vehicle of the Liberty Group, well known for its property-success, not only in South Africa, but also in the UK. L2D has a management team with extensive property experience and a long track record in the acquisition, development and management of property assets.

Iconic

The L2D Portfolio is an iconic South African retail real-estate property portfolio with assets in:

* Johannesburg (Sandton City, Eastgate Complex and Nelson Mandela Square).

The L2D Portfolio also includes interests in the mixed-use precinct of Melrose Arch. The Sandton City Complex’s attraction lies in its long-established presence and overall quality, which make it irreplaceable and confers brand-value.

The recently refurbished Nelson Mandela Square is a destination centre with a good entertainment offering, complementing the neighbouring Sandton City Complex.

Melrose Arch’s office and retail component support its status as one of the leading mixed-use precincts in Johannesburg’s high-end northern suburbs.

Similarly, the Eastgate Complex, with its strong history and recent upgrade, is located in a large catchment area, and has slowly built its way into becoming one of the most prominent malls in Johannesburg.

* Cape Town (Liberty Promenade Mitchells Plain).

* Midlands (Liberty Midlands Mall).

Liberty Midlands Mall and Liberty Promenade Mall are large, high-quality centres within regional catchment areas positioned for high growth.

* Bloemfontein (the newly developed Botshabelo Mall).

* In addition to the offices included in the L2D Portfolio’s main retail complexes, the portfolio also boasts select office properties located in key business nodes, with blue-chip anchor tenants, namely the Standard Bank Centre in Johannesburg, Liberty Centre in Century City Office Park in Cape Town and Liberty Centre in Umhlanga Ridge, Durban.

* The L2D Portfolio also includes the John Ross Eco-Junction, where the Melomed Hospital and other development opportunities will provide diversification and higher yield opportunities.

L2D invested R400million in the Midlands Mall to improve the retail offering for a broader range of customers in KwaZulu-Natal.

It caters for the KZN Midlands and the greater Pietermaritzburg area. A Lifestyle centre was added, and the gross lettable area increased from 56000m² to 78000m².

Distribution

In December 2016, when L2D listed, the pre-listing forecast was a dividend per share of 65.07c in its first year.

Unfortunately, they fell short and managed only 59.22c in 2017. The listing price of R10 faded all the way down to R7 last month. Ever since the price recovered back to R8 per share - still 20percent lower from listing in December 2016.

The estimated distribution for the 2018 financial year is for 60c per share.

The company has zero debt, and the dividend yield is 7.4percent. They are well positioned for future rental growth, especially if we experience a turnaround in the trading environment.

Management expects 7 to 9percent property income growth going forward.

An investment in L2D will give investors exposure to a quality, robust property portfolio.

Amelia Morgenrood CFP®, BCom (Hons) Financial Planning. Member of the South African Institute of Stockbrokers. Portfolio manager. Regional director. Faerie Glen Stockbroking & Financial Planning.

The views expressed here are not necessarily those of Independent Media.

- BUSINESS REPORT