Rebosis Property Fund continues to offload offices
Real estate investment trust is shifting its focus to shopping centres
East London real estate magnate Sisa Ngebulana will jettison office buildings from Rebosis for R2.19bn, as he shifts the company’s focus to retail properties.
Founded in 2010, the largest black-managed and owned listed property group, will sell the assets to empowerment partners as Ngebulana, who is CEO, tries to make good on the promises he has made over the past two years.
He said previously he wanted Rebosis to be a retail-focused real estate investment trust and made progress in this regard with the purchase of Baywest Mall in Port Elizabeth and Forest Hill City in Centurion, Gauteng, in 2016.
The R2.2bn office sale is Ngebulana's latest move to shift away from this sector, which is battling high vacancies, in favour of shopping centres which he says offer better returns. Rebosis owns six shopping centres, most of which hold dominant positions in their regions. This makes these assets more defensive as they face less competition from other landlords. Office owners throughout the country say there is a lack of demand for space due to fewer new businesses coming on to the market.
Rebosis would sell six Johannesburg CBD properties along with 189 Schoeman Street in Pretoria. It would sell 124 Main Street for up to R556m and 18 Rissik Street for up to R328.5m to empowerment consortium Aventro.
The Pretoria property and 28 Harrison Street in Johannesburg would be sold for up to R589m to empowerment consortium Endless Fortune.
Another empowerment consortium, Lunar Stone Trading, would buy Johannesburg’s Surrey House, Game Building and Bathopele Building for up to R551m.
Ngebulana said Rebosis hoped to announce the sale of another office portfolio later this week for a similar price.
The two deals would then decrease Rebosis’s total debt level significantly, with its loan to value (LTV) decreasing from 49.4% to less than 40%. A few fund managers have called for listed property funds to be conservative with their debt positions, maintaining an LTV of 30%-40%.
Ngebulana had already sold R1.5bn of offices this year before this transaction. After this deal, the fund’s office assets will be worth R7.1bn and its retail portfolio will be worth R8.1bn. Rebosis also owns a R185m warehouse and a controlling stake in UK mall owner New Frontier Properties, which is worth about R992m.
The office sale announcement sent Rebosis’s share price up 13.6% in early trade on Monday, as investors backed his “dream to make the company a retail specialist real estate investment trust that could compete with the likes of the Hyprop Investments”, which owns The Mall of Rosebank, Clearwater Mall and Canal Walk. Rebosis’s share price closed 1.99% higher at R3.07. The share price is down 68.93% year to date.
Ngebulana left his CEO position in 2017, making way for Andile Mazwai who was appointed to continue Rebosis’s transformation into a retail fund. But Mazwai left suddenly in April this year, having wanted to change Rebosis’s strategy and buy more offices, through the proposed takeover of Texton Property Fund.
Ngebulana then returned to the helm, saying he had spent the past six months trying “to fill a number of gaps at Rebosis”.
Ahmed Motara, a fund manager at Stanlib, said Rebosis was “taking the right steps by reducing its LTV” and that it could focus on better managing its shopping centres once it was a retail specialist.