Wrap Text
Operational Update
LIBERTY TWO DEGREES LIMITED
(Registration number: 2018/388906/06)
JSE share code: L2D
ISIN: ZAE000260576
(“L2D” or “the Company”)
Encouraging progress in Rebuilding for Growth
Operational update
This voluntary report provides the traditional update on the operational performance of the portfolio of Liberty
Two Degrees (L2D) as reported in the interim results released on 27 July 2020.
As noted in the interim results, the operational performance for the first six months of 2020 was significantly
impacted by the Covid-19 pandemic and the implementation of a national lockdown. The move to lockdown
level 2 on 18 August 2020 and the reopening of the South African economy has contributed to a recovery in
trading with a marked improvement in footcount at our centres with most tenants having reopened for trade.
The recent announcement of the move to lockdown level 1, on 21 September 2020, which further relaxes
restrictions on the movement and economic activity of South Africans is welcomed and will support the ongoing
economic recovery. The ability of restaurants to operate at increased capacity and the opening up of
international travel from 1 October 2020 will provide additional impetus to the South African economy and the
recovery of our hospitality portfolio.
In terms of liquidity, L2D remains well capitalised with an unchanged Group LTV of 21.7% and unutilised RCF
facilities totalling R400 milllion.
The latest weekend footcount across the portfolio is at 80% of 2019 levels with the top performers being
Sandton City (85%), Midlands Mall (88%) and Eastgate (97%). The monthly portfolio footcount at 31 August
2020 improved to 68% of the comparative 2019 level and continued to rise with a 10% increase from July
2020. The number of tenants trading as a percentage of retail GLA at 31 August 2020 was 93.1% which
represented a good improvement from the 85.4% reported at 30 June 2020.
In this report, the latest monthly turnover data is provided for July 2020 and vacancy rates at 31 August 2020
are disclosed. In addition, we provide an update on rent collections and rent negotiations as well as
commentary on the latest leasing initiatives and the delivery against some of our strategic building blocks. The
information has not been reviewed or reported on by L2D’s external auditors.
Collections and rental relief update
We are pleased to report that rental collections based on the full amounts due and before any rental relief has
increased to 74% at 31 August 2020. This is an improvement from the levels last reported at April (38%) and
May (45%) 2020. The respective collections percentages for June and July 2020 were 65% and 72%. The
improvement is a result of the further finalisation of rental relief negotiations and the fact that almost all tenants
are now trading. We expect the total arrears position to improve by year end from the 67.7% reported at half
year, as we close out all the rental relief negotiations.
Rental relief negotiations are ongoing and good progress has been made in concluding negotiations with listed
clothing retailers and major national and international retailers, however, the impact of the uncertainty in the
environment following Covid-19 remains of concern. L2D continues to work with all our restaurant and SME
tenants to get them open and back to business as soon as possible as these sectors were severely impacted
and required additional support.
Retail operational trading update as at 31 July 2020
We are pleased to note the continuing positive trend in monthly turnover and specifically the monthly portfolio
turnover for July 2020 which has returned to 71% of the turnover reported on for July 2019.
Monthly Turnover
The portfolio has seen a gradual improvement in turnover as the lockdown levels have been eased, allowing
retailers to resume trading and drawing customers back to our retail environments. Botshabelo has recorded
turnover growth over the most recent three months and this strong performance is a result of the community
nature of the mall and the relatively smaller impact from Covid-19 on both tenant performance and footcount.
There have been good improvements in trading at the other centres with Promenade and Midlands Mall only
18% and 21% off 2019 levels respectively. The turnover at the super-regional centres is approximately 30%
below the comparative 2019 periods as these malls have been more severely impacted as a result of the
lockdowns and exposure to restaurants and hospitality, however, the recent move to lockdown level 1 should
lift turnover levels further.
Vacancy update
In the current economic climate, the retail portfolio has shown some resilience with a vacancy of 3.8% at
August 2020 (June 2020: 3.5%).
The office vacancy increased from 10.1% in June to 12.2% in August 2020 and is largely due to the sale of
the fully let Century City Office. The work from home trend continues to negatively impact the office sector with
the SAPOA Q2 2020 vacancy rate at 12.3%, the highest in 16 years.
Accordingly, there has been a slight increase in vacancies across the portfolio from 5.3% in June to 6.1% in
August 2020.
% Portfolio Retail Office Specialised
June 2020
Overall vacancy 5.3 3.5 10.1 0.0
rate
Pre-let vacancy 5.0 3.3 9.3 0.0
rate
August 2020
Overall vacancy 6.1 3.8 12.2 0.0
rate
Pre-let vacancy 5.7 3.6 11.4 0.0
rate
Note: Century City was transferred on 9 July 2020 and no longer forms part of the total GLA
Leasing initiatives
L2D strives to bring new and exciting offerings to our malls and in doing so continues to enhance the customer
experience. Sandton City has successfully opened two new stores being Desigual and Refinery and
refurbished the Aeronautica Militare and Breitling premises. Tasty Gallos has opened in Eastgate’s food district
and the piazza has recently been upgraded with the addition of three solar trees. Eastgate also has its first
virtual kitchen, Cloud Dine.
Change in retail tenant exposure
Edcon (3.5% of portfolio GLA at 30 June 2020) reached agreement to sell Edgars and Jet to retailers
Retailability and The Foschini Group (TFG) respectively. The Competition Commission recently approved the
sale of the Edgars stores to Retailability as well as the transaction whereby TFG acquires the Jet stores. As a
result TFG moves from 3.0% to 3.6% portfolio GLA exposure and Retailability increases from 0.2% to 3.2%
portfolio GLA exposure. Market related rentals have been agreed with the new owners.
We continue to engage with our key tenants, on both a strategic and operational level.
Strategic initiatives
Good Spaces
L2D remains on track to become net zero waste ready by the end of 2020. The main focus has been on
engaging with our waste service providers to establish operational requirements and cost structures to enable
waste separation at source. We are in the process of acquiring Green Star ratings for all our properties and
have made the relevant submissions to the Green Building Council of South Africa. The portfolio should receive
retail Green Star ratings before the end of the year.
Smart Spaces
In response to the changing shopping preferences of our customers and their expectations for greater
convenience as well as our tenants desire to recover from the adverse impacts of the Covid-19 pandemic on
their operations, we are developing customer engagement platforms to deliver on their prioritised needs. In
addition, we are driving initiatives to optimise our operations in order to free our people to focus on developing
solutions that enhance the experiences of our customers and tenants.
Open Spaces
Open Spaces was launched in September 2020 as an enterprising initiative offering local and independent
brands a platform to submit a business plan to exhibit within any of the portfolio’s super-regional shopping
centres and community-centric malls. Unique retail packages will be offered to suit the individual offerings.
Open Spaces forms part of L2D’s #CreateTomorrow campaign with the aim of making tomorrow more
innovative.
Conclusion
We continue to act with humanity, anticipating and proactively responding to the changing needs of our
customers, while protecting the sustainability of our business in the interests of our stakeholders. In response
to the current economic environment we have also focused on our strategic building blocks and managing our
assets as efficiently as possible with an emphasis on quality property management and tenant retention.
The emphasis on creating experiences for our customers remains a strategic focus area and we consistently
challenge ourselves in merging the online and offline (in-mall) experiences, in order to create a seamless
customer journey and experience. Our promise of a positive customer experience and superior offering drives
the delivery across our various touchpoints.
We understand these unprecedented times call for tangible action in order to inspire real change. Through the
#CreateTomorrow marketing campaign that was recently launched to redefine our retail spaces, we reaffirm
our commitment to position the business for the expected step change towards rebuilding for growth for all.
This Operational Update is also available at:
https://www.liberty2degrees.co.za/investors/results-centre/
Johannesburg
28 September 2020
Corporate information
Liberty Two Degrees Limited
Date of registration: 10 July 2018
JSE share code: L2D
ISIN: ZAE000260576
(Approved as a REIT by the JSE)
(Liberty Two Degrees or L2D)
Registered Office
17 Melrose Boulevard
Melrose Arch
Johannesburg, 2196
Gauteng
(PO Box 202, Melrose Arch, Johannesburg, 2076)
Investor Relations
Gareth Rees
Email address: investors@liberty2degrees.co.za
Company Secretary
Ben Swanepoel
Contact information
Telephone: +27 11 448 5500
Email: info@liberty2degrees.co.za
www.liberty2degrees.co.za
Auditors
PricewaterhouseCoopers Inc.
Waterfall City
4 Lisbon Lane
Jukskei View
Midrand
2090
(Private Bag X36, Sunnighill, 2157)
Sponsor
The Standard Bank of South Africa Ltd
(Registration number: 1962/000738/06)
30 Baker Street, Rosebank, 2196
PO Box 61344, Marshalltown, 2107
Tel: +27 11 721 6125
Date: 28-09-2020 08:24:00
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