Rental income for real estate investment trust (Reit) Liberty 2 Degrees (L2D) for the quarter ended March 31 has been largely in line with expectations, but Covid-19-related restrictions started to impact on the hotel operations’ occupancy rates in March.

In addition, there were also some delays in filling vacant space, the company said on May 20.

As such, L2D indicated that its management’s focus was on “positioning the business to comply with all regulations and safety protocols necessitated by the pandemic” while also ensuring “deliberate plans” were in place to “regain some lost ground” as the economy reopens.

L2D has also joined the Property Industry (PI) Group, which set out to engage retailers in a unified approach on the commercial assistance that could be provided to tenants during the lockdown period.

The company said it continued to “pragmatically engage” its tenants with the aim to try and keep retail tenancies within the portfolio on sustainable commercial terms.

Rental collections based on full amounts due, and before any discounts, totalled 38.2% in April, and May collections have since increased, with 43% of current billing having been received as at May 18.

L2D expects this to significantly increase as it closes out negotiations with tenants that are now trading.

The rental collection rates are impacted by L2D’s large retail exposure, which has been the worst impacted sector during the lockdown.

The Reit’s malls closed partially on March 26, which marked the start of South Africa’s national lockdown, with only essential services trading for the five-week period of the full lockdown.

On May 1, a number of stores opened as part of the Level 4 provisions and between 60% and 70% of the gross leasable area (GLA) of L2D’s malls has returned to trading, with the exception of Promenade Shopping Centre, with nearly 80% trading, and Nelson Mandela Square, on the other hand, with only 11% trading as a result of its high restaurant exposure that remains closed.

During the first two weeks of May, the malls have seen about 60% of footcount return and L2D expects this to steadily increase as more stores open.

“The current uncertainty makes it difficult to predict when business operations will return to normality and our focus remains on enabling the retail environments to facilitate a speedy recovery as economic activity resumes,” the company commented, noting that it continues to have adequate liquidity and unused debt facilities in place to meet commitments as they become due.

L2D will release its interim financial results for the six months ended June 30 on July 27.