Liberty Two Degrees to write off remaining R17.5m Edcon stake

JSE-listed real estate investment trust (Reit) Liberty Two Degrees (L2D), which is part owner of major shopping centres like Sandton City and Eastgate, plans to effectively write off its remaining R17.5 million equity stake in embattled Edgars owner, Edcon.

The group, which has a comparatively higher exposure to Edcon among South Africa’s

Reits, on Friday confirmed the move in a pre-close statement. It comes as Edcon filed for voluntary business rescue in April, after the Covid-19 lockdown and initial restrictions to trade dealt a major blow to Edcon’s turnaround plans.

“The investment in Edcon as part of the restructuring in 2019 is carried at a fair value of R17.5 million as at 31 December 2019.

“We are currently engaging with the business rescue practitioners, but given information available at this time the investment will be fully impaired at mid-year,” L2D said in its JSE Sens pre-close statement.

As part of Edcon’s R2.7 billion rescue and restructuring agreement in March last year, L2D was one of the landlords to support the retail giant and initially invested about R25 million. However, by June last year, L2D had written down the stake by 30%.

Now it plans to fully impair the equity stake – a move that L2D CEO Amelia Beattie said was “the right thing to do”.

“Edcon is currently in arrears for both March and April rentals [to L2D]… And, considering that it is now in business rescue, we believe the most prudent thing to do is to fully impair our stake in the group,” she said.

Beattie noted that the Reit has reduced its exposure to Edcon over the last year, from just over 4% of L2D’s total gross lettable area, to occupying 3.5% of its portfolio as at 31 March.

Lawrence Koikoi, portfolio manager at Momentum Investments, said L2D’s decision to fully impair its equity stake in Edcon “makes sense”, given the financial position of Edcon.