Property Flash


August 1 2023

Liberty Two Degrees (L2D), the owner of portions of some of SA’s premium shopping centres including Sandton City, Nelson Mandela Square, Eastgate Shopping Centre, Liberty Midlands Mall, Liberty Promenade and Melrose Arch as well as offices, is set to delist in the next few months. This is after its parent, the Liberty Group buys out those minorities which own shares in the group.

L2D was listed six and a half years ago (in 2016) by Liberty at a price of R10. The price has since fallen to R5.65, paying consistent dividends along the way. Part of the listing saw Liberty policyholders receive shares. The free float was relatively limited which made L2D quite illiquid.

Liberty Group will buy out all the minority shareholders which own around 40% of the shares at R5.55 a share, a premium of 46.4% to the volume-weighted average price at which L2D has been trading over the past 30 days.

L2D will form part of the greater Standard Bank Group and will be delisted from the JSE main board. It’s uncertain which of L2D’s management will be retained but given the strong performances of the company’s properties compared with its peers, it may be wise for the board to retain the executives and best asset managers.

There has been limited consolidation in listed property in 2023. SA Corporate Real Estate bought Indluplace Properties and Heriot Reit gained control of Safari Investments but other than that there has been little activity. Many Fund managers want to invest in real estate investment trusts which have market capitalisations in excess of R3bn. Many small groups listed and became Reits during a listings boom between 2013 and 2017. Capital was more accessible and dividend growth was constant. But things have soured a fair bit since, with the Resilient property stable scandal and the pandemic.

L2D’s performance was strong in the six months to June 2023, with its top-end malls delivering returns.

The group achieved a distribution of 18.77 cents per share, which represented 7.4% growth on the comparable 2022 period and 13.0% growth compared with May 2022, against a comparison benchmark of 10.1%.

“We also generated a 6.8% increase in turnover compared to half year 2022 and recorded a 9.1% growth in foot count compared with the same period, demonstrating unrivalled innovation and customer-centricity in our spaces,” said CEO Amelia Beattie.

“In fact, all centres within the L2D portfolio continue to trade ahead of prior year trading densities except for Midlands Mall and Lifestyle Centre which generated additional turnover, in the comparative period, due to the closure of neighbouring centres affected by the KZN riots which have now opened,” she said.

Higher demand for space resulted in an improved portfolio occupancy rate of 93.6% supported by stable and favourable retail occupancies and a higher office occupancy rate. Reversions on retail renewals performed significantly better, tracking at -0.3% for the first half of the 2023 financial year compared with -9.7% for the full year 2022.

“We remain focused on office leasing with the office occupancy improving to 82.1% at June 2023 compared to 80% in December 2022,” said Beattie.

“Net property income, excluding the impact of lease straight lining, grew 8.2% over the period supported by the core retail portfolio and a recovery in the hospitality assets”, said Barbara Makhubedu, Chief Financial Officer of L2D.

“Like most businesses in the sector, increased utility costs as well as increased periods of loadshedding remain a concern. However, we are pleased that cost containment has been managed well, with property operating costs only reflecting a 5% increase and head office operating costs increasing by only 2% compared to the previous year,” she said.

Beattie said: “There is no doubt that South Africa’s macro-economic environment is, and continues to be, challenging and yet against this backdrop, our balance sheet remains strong with a loan-to-value of 24.58%. We are encouraged that we were able to show good delivery against all key operational and financial metrics. L2D’s strategy will remain focused on ensuring long-term sustainable growth and the transaction with Liberty is an important step in the value creation journey.”

One Response

Leave a Reply

Your email address will not be published. Required fields are marked *