Rebosis Property Fund, the JSE’s first listed black-managed REIT, today released robust interim financial results for the six months ended 29 February 2016. The results show stable earnings growth in Rebosis’ investment property portfolio, bolstered by the Group’s interest in its listed subsidiaries, UK based New Frontier Properties and local commercial office specialist, Ascension Properties.
The Fund declared an interim distribution of 56,79 cents per share, an increase of 8.26% on the comparative prior year period and in line with its guidance of 8% to 10% at year-end.
Rebosis Chief Executive, Sisa Ngebulana commented: “The solid distribution growth is mainly as a result of continued organic growth in our existing portfolio, a good growth and Rand return on our New Frontier Investment which benefited from value uplift opportunities, cost containment and the acquisition of the Houndshill Shopping Centre in Blackpool for a purchase amount of £105m”.
“Going forward we will continue to execute our strategy of building a retail focused, resilient portfolio yielding strong income and capital growth for our shareholders.”
At the close of the interim reporting period, the Fund’s assets under management were independently valued at R11,8 billion (2015: R7,9 billion) of which the value of Rebosis’ direct properties comprised R8,0 billion (2015:R6,9 billion). The effective holding of 59% in Ascension Properties Limited (‘Ascension’) and 67.5% (2015: 62.0%) in New Frontier Properties (‘New Frontier’) represented listed property securities of R3,8 billion (2015: R889 million).
At a Company level, Rebosis’ loan to value decreased from 35.7% to 33.7% mainly supported by the value uplift following independent property valuations. The Group’s debt increased to R4,1 billion as a result of its increased investment in New Frontier. Higher interest rates on the additional debt increased the weighted average cost of borrowings from 8.2% to 8.7% for the review period. Currency swaps and fixed arrangements were in place for 75.8% of the debt at period end, with 85% of debt subsequently fixed after the reporting period.
In March 2015, Rebosis acquired 62.0% of New Frontier for a total purchase price of R1,18 billion, which was increased to 67.5% during the review period. New Frontier has three high-street retail centres, in Burton-on-Trent and Middlesbrough with the acquisition of Houndshill Shopping Centre in Blackpool concluded during the reporting period.
Mike Riley, Chief Executive of New Frontier commented: “New Frontier’s mandate is to invest exclusively in UK shopping centres and our GBP-denominated acquisition pipeline should provide significant opportunities for value enhancement in future”.
“During the period under review, the asset management team completed 16 leasing events, 12 of which were 4.42% above ERV at an average lease length of 6.1 years. We managed to retain all of our core leases and contained service costs at £3.12 per square foot, vs the UK average of £5.10 per square foot”.
“We are well positioned in the UK with good quality retail assets that meet the specific needs of the surrounding communities. Our dividend remains on track to achieve an annualized growth forecast of 7% to 9% pound sterling.”
Ascension reported solid rental income growth and a relatively low cost-to-income ratio of 9.3%. The Company will continue its focus on long-term, sovereign underpinned leases that shields it from private sector risks such as tenant cash flow and insolvency related defaults to a large extent. The REIT is a a focused commercial fund with a strong sovereign underpin and brings geographic diversification to the Rebosis Group portfolio.
Notwithstanding its focus on sovereign leases, the company’s income stream is diversified with 43.7% of net income derived from private sector leases, 26.3% from leases with national government, 21.6% from provincial government and 8.4% from local government.
Commented Kameel Keshav, Chief Executive of Ascension:
“Over the past two years since Rebosis assumed management of the portfolio, we successfully reduced vacancies by 8 700 m2replacement of an additional 3 000 m2 period”.
“We appointed a new board effective 1 October 2015 and changed our financial year end to align with Rebosis. Performance during the reporting period has been in line with expectations, with distribution growth for the B shares increasing by 8,4% to 12.23 cents.”
Commenting on the Group’s prospects, Ngebulana concluded: “We will continue to identify and acquire quality assets in line with our investment guidelines with a medium to long-term focus on the retail sector. from 11 000 m2 following a tenant vacating at the end of their lease.
“Our portfolio fundamentals remain strong amidst a challenging economic environment. We believe we are well positioned to ensure solid future growth through completed tenant mix optimisations.”
Rebosis maintained its distribution guidance range for the 2016 financial year at between 8% and 10% above that of the prior financial year.