JSE-listed property companies brace for mall closures in Europe

Anumber of JSE-listed property counters with interests in Europe said on Monday they are bracing for the possibility of temporary closures of their malls because of the coronavirus pandemic.

Major retailers across Europe are closing stores or reducing shopping hours, with countries including Poland, Spain and Italy ordering stores to close temporarily.

These decisions could affect a number of SA property companies’ investments. SA property companies and income-paying real estate investment trusts (Reits) have spent the past decade investing mostly in Central and Eastern Europe in search of better returns. As much as 45% of SA’s listed property sector by value is located outside SA.

MAS Real Estate, which owns malls in Central and East European countries such as Romania, Bulgaria and Poland, warned on Monday it may delay planned asset sales in 2020.

CEO Martin Slabbert said there had been panic buying in Romania over the past few weeks as people stockpiled goods.

On March 14, the Polish government ordered shopping centres and retailers to close for at least 10 days, though grocery stores and pharmacies remained open. There have been forced mall closures in Bulgaria.

He said MAS would act within stipulations put in place by the governments of the countries in which the company invested.

EPP, the largest retail landlord in Poland, said on Monday it was already in discussions with tenants and financial institutions, and was working with industry groups to provide feedback to the Polish government about possible financial assistance for those affected.

Lighthouse Capital, which owns one mall in Portugal and another in Slovenia, said it had also been affected by the virus. “The Slovenian government issued a decree closing all nonessential stores in Slovenia, where one of the shopping centres owned by Lighthouse, Planet Koper, is located. At this stage, no indication has been given as to when the decree will be retracted,” it said.

Forum Coimbra, Lighthouse’s Portuguese asset, was still trading, but under government restrictions. The shopping centre footfall has reduced significantly and several stores have temporarily ceased operations.

“Given the company’s strong balance sheet, low gearing and strong liquidity, Lighthouse has the ability to navigate through this challenging period and is well positioned to acquire assets in the future that meet its investment strategy,” the firm said.

Vukile Property Fund said it was waiting for an announcement from the Spanish government on Tuesday regarding financial support for companies and businesses hit by the virus.

Vukile’s 82%-held Spanish subsidiary, Castellana Properties, operates six shopping malls and 10 retail parks across Spain.

On March 14 the government of Spain introduced a national state of emergency in response to the Covid-19 pandemic, initially expected to last for 15 days.

One of the requirements of the emergency provisions is that all retail stores in Spain, except pharmacies and supermarkets and certain service-orientated businesses, are required to close.

“Given the fluidity of the situation, it is not possible to quantify with certainty the magnitude, duration and full impact that the Covid-19 pandemic may have on the group’s retail operations, especially in Spain. The management teams are monitoring the position closely and proactively dealing with the challenges posed to tenants and operations,” Vukile said.

Shopping centres being partly shut and other measures could be put in place in SA, the head of listed property funds at Stanlib, Keillen Ndlovu, said.

He said even if the outbreak in SA did not get to a point where malls had to shut stores, there would be effects on the operating costs of mall owners.

“Operating costs are likely to go up in the short term because of additional cleaning, hand sanitisers and so on, sales may fall as fewer people visit malls, and there may be rent concessions or reductions because of lower sales,” he said.

Liberty Two Degrees, which owns portions of Melrose Arch, Sandton City and Eastgate, said trading would continue as normal at its malls but tenants would need to enhance hygiene control. The firm has established a crisis leadership team to direct its response to the pandemic.

The pandemic has come at the worst time for SA’s listed property sector.

The FTSE/JSE SA listed property index fell 12.7% on Monday, meaning it has dropped 37% in the year to date.

of SA’s listed property sector by value is located outside the country

is the number of days retail stores in Spain are required to close amid the outbreak