July 1, 2020
“This week’s episode of JSE Direct is courtesy of OUTvest, our preferred supplier in retirement products.”
Avis and Budget Rent a Car Southern Africa (owned by Barloworld):
🚗 Will retrench 50-60% of staff.
🚗 Close at least 26 of its 90 branches (1 in 3). Already down from 150.
🚗 Rental fleet already cut from 27,000 to 22,000. Will remove another 10,000 vehicles by February.
— Hilton Tarrant (@hiltontarrant) July 1, 2020
Redefine (JSE code: RDF) has sold assets worth R7.7billion to pay down debt. This improves their LTV (loan-to-value) to around 40.6%, but the risk remains as the V part of LTV is also a moving target and will likely be moving lower when their yearend comes around in August.
LTV is a very important data point in listed property and bank loan covenants will be based on this figure.
Listed property revalues their assets on a rolling three-year review. Every year a third of properties have a full revaluation. Somebody checks the lifts etc. Also important is occupancy levels and rental payment rates and increases in rentals.
The other two-thirds of the properties are adjusted in the year they're not having a hard revaluation.
Helping is that lower rates will boost valuations and debt may also in part be floating.
But we can expect valuations to be 10%-20% lower and this will spike the LTV levels really hurting the LTVs.
That said, bankers are not likely to be calling in the loans as they don't want to be landlords but remember my podcast of earlier in the year about maintaining REIT status, this is a sector under serious pressure. https://justonelap.com/podcast-property-losing-reit-status/
Lastly, adding to the woes is that the debt is often debt notes that will need to be rolled, who's going to be buying listed property debt in this market?
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