Struggling Rebosis signs leases with government tenant
Reit’s share price climbs after announcement it has renewed contracts with the department of public works
Struggling Rebosis Property Fund is at last making inroads and signing leases with a government tenant, which should help bring stability to the income streams of the JSE-listed black-owned and managed fund, it said on Tuesday.
The real estate investment trust’s (Reit’s) share price climbed 6.15% on Tuesday to close at R1.38, its best performance in nearly three weeks, after it announced it has renewed nine leases with the department of public works, covering a total gross lettable area of 62,354m².
The department has been slow to renew leases with its landlords including listed groups such as Rebosis and Delta Property Fund.
Government tenants have tended to opt for leases with short maturities ranging from a few months to a year, which have placed strain upon Rebosis and Delta because the companies consequently cannot provide lenders and investors with accurate and predictable earnings forecasts.
Rebosis, which was listed by CEO Sisa Ngebulana eight years ago, has been under pressure over the past year. Its share has collapsed 82.75% from R8.00 on May 7 2018. This has harmed investors’ holdings in the group, including the Government Employees Pension Fund, which holds about 20.37% of Rebosis, and Coronation Fund Managers, which has a 6% stake.
Ngebulana has been trying to exit the office market in favour of retail properties. He said he wanted to turn Rebosis into a retail fund that rivals the likes of Hyprop Investments, the owner of malls such as Hyde Park Corner, Mall of Rosebank, Clearwater and Canal Walk. Rebosis’s shopping centres include Hemingways in East London and Baywest Mall in Port Elizabeth.
Rebosis also owns a stake in UK mall owner New Frontier Properties, an investment that has let Rebosis down in recent months. Some of the tenants at New Frontier’s malls have gone into administration. It has also breached debt covenants.
Since October 2018 Rebosis has disposed of offices to the value of R5.2bn. Proceeds from the disposals are being used to reduce the company’s loan-to-value (LTV) to below 40%. Rebosis’s last disclosed LTV was 49.4% at end-November.
Rebosis will report financial results for the six months to February on May 14.
Ngebulana has blamed many of Rebosis’s weaknesses on New Frontier’s poor performance.
He said the LTV overhang and drop in earnings were caused by exposure to UK retail that has been devalued and earnings eliminated due to ongoing Brexit uncertainty, as have been seen with all UK retail Reits.