Liberty Two Degrees pre-close update


Liberty Two Degrees pre-close update


Published Date: 2021-11-29 | Source: INCE|Community | Author: The Finance Ghost

Liberty Two Degrees pre-close update

Liberty Two Degrees (L2D) has released a pre-close investor update. The financial year ends on 31 December and the fund enters a closed period on 1 December, which means insiders cannot trade the shares from that date until the results are released.

The portfolio occupancy level improved to 93.8% in October, with retail at 97.3% and office at 86.1% as that entire sector continues to struggle. The office vacancies have gotten slightly worse since June, driven by additional vacancies at Melrose Arch and Sandton City.

Negative reversions across the portfolio came in at 24.2%. This means that tenants are negotiating cheaper leases than before. With this much pressure in the market, tenants hold the negotiating power.

Footcount looked great heading into winter, with April and May running at 98% and 99% of the corresponding months in 2019 respectively. July was obviously a disaster for footfall (68.4% of the July 2019 level) as the country battled lockdowns and civil unrest.

In the wake of the unrest, footcount in August and September increased and October was 95.5% of the same month in 2019. On a year-to-date basis though, the retail portfolio is up 29.3% vs. 2020 and down 6.8% vs. 2019.

Sandton City's monthly turnover is up 34.4% vs. September 2019 and exceeded the comparative 2019 level by 16%. Stores in the luxury brands, grocery and technology categories led the recovery. The fund has noted that the restaurant and fast-food categories both remain under pressure. Interestingly, there are plans to develop a rooftop family restaurant and urban farm at Sandton City as soon as a suitable restaurant tenant has been identified.

The hospitality portfolio is a mixed bag of note, with the Sandton Sun having achieved 63.3% occupancy in October and Garden Court only managing 25.3% in its first month of full trade. Sandton Intercontinental Towers remains closed and the Convention Centre is doing its best under the circumstances, having hosted 41 events.

The fund has refinanced R500 million of term debt and added another R100 million term debt to fund any long-term capital commitments. The weighted average cost of debt is 7.8%.

The loan-to-value ratio in the fund (25.17%) is among the lowest I've seen in the REIT peer group on the JSE.


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