‘Broke’ Edgars won’t dent Oryx rent

Oryx Properties has shielded itself against possible vacant space in Maerua Mall resulting from Edcon’s bankruptcy protection by reaching a lease agreement with South African-based Retailability, the new owners of Edgars.

In its latest annual results, released on Thursday, Oryx said it “agreed on the terms of a new three-year lease agreement” with Retailability subsequent to the close of its past financial year on 30 June. The agreement “reduces the risk of this potential vacancy in the short term,” Oryx said.

According to the locally-listed group, the formal agreement will be signed after the competition tribunal approves the sale of Edgars to Retailability in South Africa.

Edcon has signed an agreement to sell parts of its business to private equity-backed Retailability Ltd, Reuters last month quoted the administrators in charge of its restructuring. The competition watchdog in South Africa approved the deal on 7 September, according to Business Day.

Retailability plans to use Edgars’ unique value proposition and its large target market to ensure the growth and the continuity of a proudly SA Edgars brand, Business Day quoted Edcon.

Edcon, which owns the 91-year old department store chain Edgars, entered into a form of bankruptcy protection in April after a coronavirus-led lockdown hurt the already struggling finances of the company.

Retailability

“[The deal] not only indicates confidence in the Edgars business but augments Retailability’s already blue-chip level of retail expertise,” said Matuson Associates, administrators told Reuters. As a next step in the process, the administrators and Retailability will start work on signing of the sale and purchase agreements for Edgar’s rest of Africa business. The transactions will close by September and will save a “significant” number of jobs, the administrators said. Durban-based Retailability, which also runs the clothing outlets Beaver Canoe for men’s fashion, Style for families and Legit, has 440 stores and some 2 000 employees in South Africa and neighbouring countries.

These are mainly located outside of big cities where the core of its low to middle income target market exists.

Edcon signed a deal with retailer TFG in August to sell select assets of budget clothing retailer Jet.

Vacancy

Oryx’s commercial vacancy factor – as a percentage of lettable area – increased from 3.2% in its 2019 book-year to 5.4% its 2020 financial year.

“The increase is aggravated by the current trading environment which continues to put pressure on tenants’ ability to remain profitable,” Oryx said. According to the group, lease escalations have been flat or negative for parts of the retail and office sectors and compressed for the industrial sector. Oryx said debt collections remain under pressure. The group’s provision for bad debts increased to N$23.2 million, up nearly 170% from the N$8.6 million in 2019. This is due to the impact of Covid-19, as well as the application of IFRS 9 – a mandatory international financial reporting standard. Net property income for the year under review was nearly N$226.7 million, up around 1.5% from the 2019 financial year. Oryx said property income increased despite the rent relief of N$18 million granted to tenants as a result of Covid-19 from April to June.

“Excluding the rent relief, rental growth would have been 8.2% which is attributable to the residential acquisition made during the year,” it said. The group suffered an overall loss of more than N$88.4 million in its past book-year. – Additional reporting by Nampa/Reuters