SA mall operators will continue to provide Covid-19 rental relief
Two of SA's prime commercial property owners will extend rental relief to struggling tenants this year, in a sign the affect of Covid-19 is far from over for hard-hit real estate firms, though they see the tide turning at the end of 2021.
Liberty Two Degrees (L2D) and Redefine Properties — owners of some prominent commercial real estate in Johannesburg and Cape Town — said they would have to provide rental relief for longer.
SA's commercial real estate sector — with its collection of high-rise office spaces and huge shopping malls — has been among the country's worst hit, along with travel and tourism.
With rising debt levels and falling income, some have been forced to sell assets and agree to lower rental payments or offer relief to tenants in shopping malls and offices as more people worked from home, diminishing footfall.
Liberty Two Degrees CEO Amelia Beattie said during a media call that shoppers were slowly returning to malls but tenants had not recovered to pre-Covid-19 levels and would still need rental discounts.
The tenants that have yet to recover include hotels, hospitality, restaurants and fast food. L2D expects “to provide some support to them to the end of the first quarter of this year”, L2D's Financial Director José Snyders added.
L2D provided R112m of rental relief to its tenants for the year ended December 31. As a result, net property income fell 45.6%.
Competitor Redefine has forecast an additional R21m rand in rent relief to its retail tenants and an additional R25m rand for office tenants until August 2021, Redefine's COO Leon Kok said during a media pre-close briefing.
The major focus for both Redefine and L2D in recent months has been on preserving liquidity and lowering debt levels or loan-to-value ratio (LTV), which measures the ratio of a company's debt and its assets.
Redefine's CEO Andrew Konig said the company's balance sheet was in a stronger position than it was before Covid-19 and that hopefully by August it should be able to get its LTV back to levels it was comfortable with.
“We believe that 2021 will be the turning point for Redefine,” he said, adding it can now look at expanding its portfolio after selling some assets to reduce debt.