Re­bo­sis re­duces its ex­po­sure to gov­ern­ment busi­ness

CityPress - - Business - JUSTIN BROWN justin.brown@city­

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.

Sisa Nge­bu­lana

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