Rebosis reduces its exposure to government business
The Rebosis Property Fund was reducing its exposure to government business to improve its rating in the eyes of investors, given the poor perception of the state, CEO Sisa Ngebulana said this week.
Ngebulana estimates that Rebosis’ share price is trading at a 30% discount to its net asset value.
Kameel Keshav, Rebosis’ chief financial officer, said the company would like to see its share price trading at a premium to its net asset value.
Key among these measures was the reduction in Rebosis’ exposure to government, which has fallen from 55% to 31% of the company’s portfolio. It is also selling three government properties worth about R847 million, which will reduce the funds’ exposure to municipal government.
“Nenegate was not good for us. Exposure to government is no good for us. We have reduced our government exposure,” Ngebulana said.
The increasing negative publicity around government was another reason Rebosis was reducing the amount of business it was doing with the state, and why it was increasing its interest in retail properties, he added. There were two core reasons Rebosis was cutting its exposure to the state, Ngebulana said. “One is bad perception around government. Make no mistake, they are good tenants. They pay on time. We have no issues with government. They are an excellent tenant for us. However, perception is driven by everything that you see in the press. The listed space [listed property stocks] has tried to run away from government. “That perpetuates everything bad about government in so far as most players in the listed space got rid of their interests in government. That has had an effect on anyone exposed to government. “Secondly, there has been a lack of transparency and policy direction when it comes to leases with government. The lack of policy direction and transparency is the biggest thing. We have been driving to achieve certainty around this.
“We are hoping that government will make this clear by February. There have been road shows to showcase what it is doing. On Friday last week, I met CEOs of banks and had workshops with the industry. I have had meetings one-on-one with the CEO of the new company that government has set up. If that perception goes away and people understand government, Rebosis will get a massive rerating.”
Ian Anderson, Grindrod Asset Management’s chief investment officer, said that it was good that Rebosis was reducing its exposure to government, especially in terms of municipal government rentals, given the high level of indebtedness found among local municipalities.
Grindrod Asset Management owns 7 million Rebosis shares, or 1.3% of total shares in issue.
Anderson said investor sentiment towards government office rental income had been sour for some time, but if times remained tough, it was likely to turn because central government was a reliable payer of its rentals.
However, the biggest beneficiaries from any change in sentiment would be “empowered landlords” such as Rebosis, as well as the Delta Property Fund and the Dipula Income Fund, Anderson said.
“From Rebosis’ share price of late, the market does look as though it likes Rebosis’ new strategy,” he added.
Other steps that Rebosis had taken to try to boost its rating included increasing its fund size to R8.3 billion and increasing its retail focus from 49% to 66%.
Rebosis has also entrenched its position in the FTSE/JSE SA Listed Property Index and extended its debt and hedge profile to try to boost its standing among investors.
At the end of August, Rebosis owned 20 properties valued at R8.7 billion.
Looking to the outlook, Ngebulana said low local economic growth, weak retail sales, high interest rates, political uncertainty and the possibility of a credit rating downgrade would all probably weigh on Rebosis.