British investment New Frontier creates problems for Rebosis
Struggling Rebosis Property Fund wants to reduce its loan-to-value ratio to below 40%, from 49.4% at the end of November
Struggling Rebosis Property Fund, which on Friday warned that its 2019 financial year was set to be its worst since listing eight years ago, will sell three of its local malls for R1.8bn to repay loans.
The fund’s CEO and founder, Eastern Cape entrepreneur Sisa Ngebulana, had spent a couple of years selling office properties so that he could transform Rebosis into a pure retail landlord to compete with Hyprop Investments and others.
Its balance sheet is laden with debt and the shoddy performance of its UK investment New Frontier Properties has put more pressure on its finances.
Keillen Ndlovu, head of listed property funds at Stanlib, said: “Rebosis was left with no option but to sell not only office assets, but some of its best retail assets as well, in order to solve debt and cash flow issues.”
Vukile Property Fund has made an offer to buy Mdantsane City Shopping Centre, Sunnypark Shopping Centre and Bloed Street Mall for R1.8bn.
Rebosis wants to reduce its loan-to-value ratio to below 40%, from 49.4% at the end of November.
Garreth Elston, chief investment officer at Reitway Global, said Rebosis had become “a forced seller of its good assets”.
“It helps them in the short run, but in the long term they are losing exposure to some of their best performing assets. But they have faced a storm of problems,” said Elston.
Ngebulana was unavailable for comment for Monday.
Rebosis said in a statement that it experienced delays in the planned disposals of its office portfolio. Getting tenants to renew long-term leases was taking longer than anticipated.
Some analysts have said that many of Rebosis’s problems were caused by its decision to buy its first investment in the UK in 2015 when it bought 62% of New Frontier for R1.18bn.
New Frontier’s assets have lost value in the wake of uncertainty over the UK’s planned exit from the EU. Some of the company’s tenants are also struggling to compete with online retail and are getting rental holidays and negative reversions.
“Chief among the reasons for Rebosis’s failure has been its exposure to New Frontier. In addition, other factors, some of which are more industry related, such as increasing loan-to-value ratios, rising funding costs, vacancies trending upwards, falling rental growth as well as a weak local retail and economic environment, have not helped Rebosis’s situation,” said Ndlovu.
Meanwhile, Vukile CEO Laurence Rapp, said the “shopping centres fit very well into our South African portfolio, as they serve mid to lower living standards measure customers. They are located in high-density urban areas in SA and offer bulk expansion opportunities.”
Rebosis said on Friday it would not pay a dividend for the February interim period. Its A and B shares on Monday closed 5.56% and 9.29% lower at R18.18 and R1.27 respectively.