May 6, 2020 / 3:51 PM / 22 days ago

S.Africa's Investec Property Fund sees limited impact from Edcon's bankruptcy protection

JOHANNESBURG, May 6 (Reuters) - South Africa’s Investec Property Fund (IPF) said on Wednesday it expects retailer Edcon’s decision to seek bankruptcy protection to have a limited impact on its business.

Last Wednesday South Africa’s biggest non-food retailer filed for a business rescue - the nation’s bankruptcy protection process - becoming the country’s first major corporate casualty of the coronavirus pandemic.

Edcon, which owns department stores chain Edgars and budget clothing retailer Jet, is a tenant of six of the Fund’s retail properties, with gross leasable area (GLA) exposure of about 15,900 square meters or only 1.4% South African GLA, IPF said.

IPF said it had limited exposure to the struggling retailer because when Edcon received a 2.7 billion rand ($143.9 million) lifeline in new cash and rent deductions from its main shareholder and participating landlords last year, IPF elected to contribute via the reduced rental option instead of equity.

It had anticipated a reduction in rental income of about 9.8 million rand commencing May 1 2019, it said.

“As a result, Edcon constitutes a nominal portion of the Fund’s income, representing 0.9% of total South Africa revenue and 0.6% of group revenue on a proportionally consolidated basis,” IPF said.

Edcon said it had lost 2 billion rand of sales since the virus reached South Africa in early March and the government responded with a nationwide lockdown that forced non-essential shops to close.

That hit, coupled with a decline in collections from debtors, meant the company was unable to pay suppliers and creditors in March and April.

Last Wednesday Liberty Two Degrees, in whose portfolio Edcon occupies 3.5% of total GLA, said it would review the business rescue plan once it is made available, while on Monday Redefine Properties said it was looking to further reduce its 55,000 square meter exposure to Edcon.

Landlords hurt by the demise in 2017 of South Africa’s oldest department chain, Stuttafords, have been looking at ways to minimise exposure to Edcon, which has been either closing stores or reducing store space, to prevent huge losses in income. ($1 = 18.7477 rand) (Reporting by Nqobile Dludla; Editing by Emelia Sithole-Matarise)

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