L2D as solid as prop­erty can be as in­vest­ment

Cape Times - - OPINION & ANALYSIS - Amelia Mor­gen­rood

LISTED prop­erty has had a dis­mal year so far. The in­dex de­liv­ered a to­tal re­turn of mi­nus 18 per­cent and was dragged down mainly by the Re­silient sta­ble com­pa­nies, which lost be­tween 40 and 60 per­cent of their value. Rand hedges in this in­dex bore the brunt of the stronger rand and lin­ger­ing con­cerns on how Brexit will play out.

After years of stel­lar per­for­mance, it is also not un­com­mon for a sec­tor to con­sol­i­date and take a breather. After all, if you in­vested R100 in the Listed Prop­erty In­dex ten years ago, you will now have R421 (div­i­dends in­cluded), still the best per­form­ing as­set class in South Africa, even after the mas­sive drop.

Lib­erty Two De­grees (L2D) is the listed ve­hi­cle of the Lib­erty Group, well known for its prop­erty-suc­cess, not only in South Africa, but also in the UK. L2D has a man­age­ment team with ex­ten­sive prop­erty ex­pe­ri­ence and a long track record in the ac­qui­si­tion, de­vel­op­ment and man­age­ment of prop­erty as­sets.

Iconic The L2D Port­fo­lio is an iconic South African re­tail real-es­tate prop­erty port­fo­lio with as­sets in:

Johannesburg (Sand­ton City, East­gate Com­plex and Nel­son Man­dela Square).

The L2D Port­fo­lio also in­cludes in­ter­ests in the mixed-use precinct of Mel­rose Arch. The Sand­ton City Com­plex’s at­trac­tion lies in its long-es­tab­lished pres­ence and over­all qual­ity, which make it ir­re­place­able and con­fers brand-value.

The re­cently re­fur­bished Nel­son Man­dela Square is a des­ti­na­tion cen­tre with a good en­ter­tain­ment of­fer­ing, com­ple­ment­ing the neigh­bour­ing Sand­ton City Com­plex.

Mel­rose Arch’s of­fice and re­tail com­po­nent sup­port its sta­tus as one of the lead­ing mixed-use precincts in Johannesburg’s high-end north­ern sub­urbs.

Sim­i­larly, the East­gate Com­plex, with its strong his­tory and re­cent up­grade, is lo­cated in a large catch­ment area, and has slowly built its way into be­com­ing one of the most prom­i­nent malls in Johannesburg.

Cape Town (Lib­erty Prom­e­nade Mitchells Plain). Mid­lands (Lib­erty Mid­lands Mall). Lib­erty Mid­lands Mall and Lib­erty Prom­e­nade Mall are large, high-qual­ity cen­tres within re­gional catch­ment ar­eas po­si­tioned for high growth.

Bloem­fontein (the newly de­vel­oped Bot­sha­belo Mall).

In ad­di­tion to the of­fices in­cluded in the L2D Port­fo­lio’s main re­tail com­plexes, the port­fo­lio also boasts se­lect of­fice prop­er­ties lo­cated in key busi­ness nodes, with blue-chip an­chor ten­ants, namely the Standard Bank Cen­tre in Johannesburg, Lib­erty Cen­tre in Cen­tury City Of­fice Park in Cape Town and Lib­erty Cen­tre in Umh­langa Ridge, Dur­ban.

The L2D Port­fo­lio also in­cludes the John Ross Eco-Junc­tion, where the Melomed Hospi­tal and other de­vel­op­ment op­por­tu­ni­ties will pro­vide di­ver­si­fi­ca­tion and higher yield op­por­tu­ni­ties.

L2D in­vested R400 mil­lion in the Mid­lands Mall to im­prove the re­tail of­fer­ing for a broader range of cus­tomers in KwaZu­luNatal.

It caters for the KZN Mid­lands and the greater Pi­eter­mar­itzburg area. A Lifestyle cen­tre was added, and the gross let­table area in­creased from 56 000m² to 78 000m².

Dis­tri­bu­tion

In De­cem­ber 2016, when L2D listed, the pre-list­ing forecast was a div­i­dend per share of 65.07c in its first year.

Un­for­tu­nately, they fell short and man­aged only 59.22c in 2017. The list­ing price of R10 faded all the way down to R7 last month. Ever since the price re­cov­ered back to R8 per share – still 20 per­cent lower from list­ing in De­cem­ber 2016.

The es­ti­mated dis­tri­bu­tion for the 2018 fi­nan­cial year is for 60c per share.

The com­pany has zero debt, and the div­i­dend yield is 7.4 per­cent. They are well po­si­tioned for fu­ture rental growth, es­pe­cially if we ex­pe­ri­ence a turn­around in the trad­ing en­vi­ron­ment.

Man­age­ment ex­pects 7 to 9 per­cent prop­erty in­come growth go­ing for­ward.

An in­vest­ment in L2D will give in­vestors ex­po­sure to a qual­ity, ro­bust prop­erty port­fo­lio.

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