Liberty Two Degrees (L2D) has posted a big decline in 2020 earnings, but says shoppers are returning to its malls across South Africa after they were left empty during the hard lockdown last April. And while numbers were still down on 2019, the landlord says customers spent more when they visited.
While conventional wisdom was that smaller, local shopping centres were faring better because of Covid-19 restrictions and customers shopping closer to home, footfall at L2D’s centres picked up towards the end of the year, with Sandton City back at 72% of December 2019’s levels and Nelson Mandela Square at 62%.
For 2020 as a whole, foot count across its portfolio of centres, which also includes Eastgate, Melrose Arch, Midlands Mall and Botshabelo Mall, was 30% down from 2019. However, the total amount of money spent by customers was just 20% lower, indicating increased spending per customer. Revenue at the centres also recovered, with turnover across its portfolio down 9% in the final quarter of 2020 from a year earlier, and Sandton City’s just 1.5% lower.
“This highlights the relevance of quality super-regional centres in optimal locations, complemented by an appropriate and diverse tenant mix addressing customer needs and supporting customer experience,” L2D said in its results announcement.
“It also illustrates that consumer spend was not only captured by neighbourhood centres as a shopping format.”
Still, the real estate investment trust has reported a significant decline in full-year earnings, with a commensurate reduction in its distribution to shareholders.
Although revenue for the year to end-December was just 12% lower at R879-million, net property income fell by 46% to R377-million due to the relief it granted to tenants that couldn’t operate, the suspension of hotel and convention centre operations, and the additional provisions it had to make for tenants that were in arrears with their rent. It also lost out on lucrative parking revenue. Headline earnings per share declined by 57% to 25.04c and it lowered its distribution per share by 47% to 32.33c.
At the end of December, L2D’s South African property portfolio was valued at R8.5-billion, down from R10.1-billion a year earlier, due to the impact of Covid-19 on rentals and growth assumptions, increased vacancies and the expectation that it will take longer than usual to fill vacant space at its centres. As a result, its net asset value per share fell by 20% to R7.71.
However, its retail portfolio was 95.3% occupied, just above its tolerance level of 95% in pre-Covid-19 times. Vacancies in its portfolio of office properties fared worse, rising to 12.4% from 10.2% at the end of 2019. It said Ster-Kinekor, which was placed in voluntary business rescue last month, didn’t have an impact on its property valuations.
The company’s shares closed just under 1% higher at R4.89 on Monday, building on a 13% rise on Friday ahead of the release of its results. DM/BM
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