L2D ups stake in port­fo­lio

Lib­erty Group sells shares val­ued at R2.5bn in jointly owned prop­er­ties

The Star Early Edition - - COMPANIES & NEWS - Roy Cokayne

LIB­ERTY Two De­grees (L2D), the di­ver­si­fied real es­tate in­vest­ment trust (Reit) that listed on the JSE in De­cem­ber, ex­pects the ad­di­tional stake it has ac­quired in a high-qual­ity prop­erty port­fo­lio it co-owns with Lib­erty Group will en­hance the port­fo­lio’s to­tal re­turn.

The com­pany an­nounced last week that Lib­erty Group has sold it fur­ther un­di­vided shares in prop­er­ties they co-own to the value of R2.5 bil­lion af­ter Lib­erty ex­er­cised its PUT op­tion in terms of an agree­ment en­tered into be­fore the list­ing of L2D.

The ac­qui­si­tion in­creases L2D’s own­er­ship of the Lib­erty prop­erty port­fo­lio to 31 per­cent from 22 per­cent.

The port­fo­lio, which com­prises 13 prop­er­ties, is val­ued at R27.9bn.

Once com­pleted, the trans­ac­tion will re­sult in L2D own­ing dif­fer­ent per­cent­ages of the prop­er­ties in the port­fo­lio, in­clud­ing 23.25 per­cent of the Sand­ton City com­plex, 31 per­cent each of East­gate, Lib­erty Prom­e­nade Shop­ping Cen­tre, Lib­erty Mid­lands Mall and Nel­son Man­dela Square, and 7.75 per­cent of Mel­rose Arch.

L2D said yes­ter­day that the dif­fer­ence be­tween the in­ter­est earned of 8 per­cent, as fore­cast in its pre-list­ing state­ment, and the net yield earned on the real es­tate as­sets ac­quired, which was cal­cu­lated as 6.8 per­cent, may re­duce its dis­tri­bu­tions in 2017, as set out in the pre-list­ing state­ment, by 2.5 cents a unit.

It said the net yield was cal­cu­lated by di­vid­ing the ex­pected net prop­erty in­come of the ad­di­tional prop­er­ties by the pur­chase price.

“The ad­di­tional stake in th­ese high-qual­ity as­sets that are man­aged by SRFM (Stan­lib Reit Fund Man­agers) en­hances the to­tal re­turn of the port­fo­lio go­ing for­ward,” it said.

L2D de­cided to set­tle the con­sid­er­a­tion payable for the in­creased stake in the port­fo­lio in cash to de­ploy the ma­jor­ity of its cash re­sources, re­sult­ing in R2.5bn of the cash re­serves of R2.9bn at the end of June be­ing com­mit­ted af­ter the six­month re­port­ing pe­riod.

Amelia Beat­tie, the chief ex­ec­u­tive of L2D, said yes­ter­day the com­pany be­lieved in the re­silient na­ture and qual­ity of the prop­er­ties it al­ready owned, and the ad­di­tional stake would sup­ple­ment the ex­ist­ing po­si­tion and sup­port the growth prospects of the fund.

Dis­tri­bu­tion

L2D yes­ter­day re­leased its maiden in­terim re­sults for the six months to the end of June, re­port­ing that a mid-year dis­tri­bu­tion of 30c a unit had been ap­proved.

Net as­set value a unit in­creased 3.1 per­cent to R9.94.

Op­er­at­ing costs as a per­cent­age of con­trac­tual in­come im­proved to 30.3 per­cent from 30.8 per­cent.

The port­fo­lio va­cancy rate de­creased to 1.3 per­cent from 3.3 per­cent.

The purely South African re­tail as­set port­fo­lio was val­ued at R6.14bn.

Beat­tie said the port­fo­lio con­tin­ued to demon­strate its re­silience in the cur­rent dif­fi­cult eco­nomic en­vi­ron­ment, and the maiden in­terim re­sults were in line with ex­pec­ta­tions.

“The port­fo­lio met­rics mea­sured against the bench­marks and com­par­a­tive in­dus­try in­for­ma­tion demon­strate the re­silient per­for­mance in­her­ent in the un­der­ly­ing as­sets.

“We re­main op­ti­mistic that the unique qual­ity and po­si­tion­ing of th­ese premier as­sets will con­tinue pro­vid­ing con­sumers with a com­pelling shop­ping ex­pe­ri­ence, and in turn en­able the port­fo­lio to with­stand the im­pact of the cur­rent eco­nomic en­vi­ron­ment,” she said.

“Look­ing at the year ahead, L2D main­tains a com­pelling in­vest­ment propo­si­tion driven by fo­cused re­tail man­age­ment and devel­op­ment projects that will drive growth to de­liver sus­tain­able earn­ings. We con­tinue to en­hance the ten­ant mix and cus­tomer ex­pe­ri­ence, to bet­ter po­si­tion our as­sets,” she said.

Shares in L2D closed un­changed at R9.50 yes­ter­day.

PHOTO: SUPPLIED

Lib­erty Two De­grees says its ac­qui­si­tion of a fur­ther 9 per­cent of the prop­erty port­fo­lio it co-owns with Lib­erty Group will en­hance the value of the port­fo­lio.

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