Rebosis making headway in debt talks, says CEO

Rebosis Property Fund founder and CEO Sisa Ngebulana moved to reassure shareholders on Tuesday that the company is making progress in talks with unnamed investors for a transaction that could throw the debtladen property firm a lifeline.

The company is in talks with local and offshore institutions and pension funds for a deal meant to reduce its debt, which was racked up through the financing of some of its flagship shopping malls, including Baywest Mall in Gqeberha and Forest Hill in Centurion.

The fund has pinned its hopes on the mooted transaction that will cut its debt relative to its assets as measured by loan-tovalue (LTV) from the current 72.2% to 40% by the time it releases its year-end results later this year.

LTV measures a property fund’s debt relative to the value of its asset portfolio. Fund managers prefer for property funds to have LTVs below 40%, as levels above 40% tend to indicate financial distress.

Rebosis, the first blackowned and managed property fund to list on the JSE, was first plunged into crisis when the UK decided to leave the EU in 2016, sparking uncertainty that devalued property prices. Rebosis had a 67% interest in New UK-based Frontier Properties, which owns shopping centres, but it was trimmed to 36% before it was eventually written off at a cost of R2bn.

The Brexit fallout and more recently Covid-19 combined to knock the share price, which slumped from R13 in 2017 to 31c on Tuesday, giving Rebosis a market value of R196m.

The company, which owns a mix of shopping malls and offices that are primarily leased to the government, managed to reduce its debt to R9.5bn from R9.6bn in the six months to endFebruary after selling the Medscheme building for R89.1m. The value of its portfolio of assets is R13.1bn.

The fallout of Covid-19 had a marked effect on its retail portfolio that played out partly through rental concessions, though the company said the situation is improving.

“Our office portfolio remains very robust with no Covid-19 related impact,” said Ngebulana.

The group’s net property income was down 12.8% on a like-for-like basis due to negative rental reversions (meaning it renewed leases with tenants at lower rates) and bad debt writeoffs due to Covid-19 lockdown restrictions.

The company again opted not to declare a dividend to preserve cash, in a move that could raise questions on its status as a real estate investment trust (Reit). It last paid a dividend in 2018. Reits are required to pay at least 75% of their distributable income each year as a dividend.

The fund reported normalised distributable income of R184m before one-off items relating to the successful conclusion of a dispute resolution process after Rebosis’s acquisition of Baywest and Forest Hill shopping centres in 2016.

The one-off liability regarding the dispute resolution cost the company R175m.