Sisa Ngebulana. Picture: FINANCIAL MAIL
Sisa Ngebulana. Picture: FINANCIAL MAIL

Businessman Sisa Ngebulana’s Rebosis Property Fund says the group could consider delisting and going private if the touted merger with SA’s largest government-tenanted landlord, Delta Property Fund, fails to go ahead.

Rebosis’s B shares have lost almost 90% of their value in 2019, due to its failed investment in UK mall owner New Frontier Properties and the company struggling to raise rental rates across its local assets. The company offers A and B shares for investors with different risk profiles. Rebosis A shareholders are guaranteed distribution growth of 5% and are paid first. B shareholders are paid the residual.

Rebosis and Delta were in advanced “positive” talks, Ngebulana said at a results presentation on Monday. He said the proposed merged entity would have assets of about R29bn and would increase liquidity for Rebosis’s shareholders.

“We are making progress with the merger which will create a much larger fund with better scale and a better credit rating. However if the merger didn’t go ahead, as a fund we have a number of options, having been approached by private equity investors for example,” he said.  

A circular containing a scheme of arrangement and a firm attention for the merger from Rebosis would likely be out towards the end of January, chief investment officer Rob Becker said.  

The group chose to withhold its dividend for its year to end-August as it battled to grow rentals given what Ngebulana said were the worst market conditions for South African commercial property in memory.

“This is the worst market ever. Tenants are under tremendous pressure and commercial property values have been devalued. We have taken a write down of R1bn which we decided to put through our books now instead of over time,” Ngebulana said.

Rebosis has also been trying to cut its loan-to-value (LTV) from about 60% to below 40%, by selling assets.

Most fund managers want property counters to have LTVs of between 30% and 40%.

After an independent evaluation, the value of its portfolio, which includes Baywest Mall in Port Elizabeth, Hemingways Mall in East London, Forest Hill in Centurion and a mix of offices, fell 8.7% to R16.5bn, with Rebosis’s distributable income falling 71% to R226m as it suffered a number of asset value writedowns.

In July, the fund sold its investment in New Frontier Properties, losing R2.4bn, after the subsidiary’s underlying assets were devalued because of uncertainty about Brexit, Ngebulana said.

Jay Padayatchi, executive director at Meago Asset Managment said Rebosis’s big challenge was managing its LTV.  

“It seems like there are still a few gems in that portfolio based on the operating metrics even if LTV is clearly a big problem that Rebosis must overcome. With this comes opportunities for the investor willing to ride the wave,” he said.

With Karl Gernetzky