Rebosis hopes to keep Reit status
Struggling real estate investment trust (Reit) Rebosis Property Fund, which has seen its share price lose more than 90% of its value on the JSE over the last year, has opted not to pay dividends to shareholders for the year to August 31.
The move sees Rebosis become the first local Reit not to pay out a dividend since Reit capital structure legislation came into effect in SA in 2013. It also means that Rebosis, which published its full-year results on Monday, will have to pay the receiver of revenue R38 million in dividend taxes, due to the group’s decision to retain distributions for its 2019 financial year.
Traditionally, Reits do not pay dividend taxes as investors in such funds are subject to income tax on dividends.
Founder and CEO Sisa Ngebulana, who listed the group as the JSE’s first black-managed Reit in 2011, does not expect the company to lose its Reit status following the dividends decision.
“The board deemed it prudent to retain distributable income this year in order to preserve capital, given the position of the company and the tough economic and market conditions in SA, which is the worst environment we have ever experienced,” he said.
Ngebulana noted that the move was aimed at deleveraging the business and strengthening its balance sheet.
The company’s loan-to-value ratio stands at a sector-high 60%, on the back of its failed UK property foray through shopping mall-focused New Frontier Properties. It spent over R1 billion on the UK venture, which it sold for just R700 earlier this year, after the offshore group suffered property devaluations.
Rebosis’s total distributable earnings for the year declined by almost 30% (R101 million) to R226 million. It blamed the decline mainly on historic bad debts being written off, the taxation of R38 million payable on the retained distribution, increased professional fees relating to property disposals and early settlement of cross-currency swaps.
Despite the group’s poor performance, Ngebulana was positive about its prospects. He highlighted Rebosis’s better operational performance for the year and its possible merger with fellow Reit, Delta Property Fund. It has also put several assets up for sale and is selling one of its first mall developments, the Mdantsane City Shopping Centre, for R521 million.