L2D ups stake in portfolio
Liberty Group sells shares valued at R2.5bn in jointly owned properties
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.
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.
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.