Rebosis cushioned by defensive office portfolio

Founder and Executive Deputy Chairman of Rebosis,, Sisa Ngebulana.
Founder and CEO of Rebosis Property Fund, Dr Sisa Ngebulana.

Rebosis Property Fund has released its interim results for the six months ended 28th of February 2021. Comparative results were significantly impact by Covid-19 related lockdowns in the reporting period compared to a normal trading six months which had no impact. 

The group’s net property income decreased 12.8% on a like-for-like basis due to rental reversions (10%) and bad debt write-off (2%).

However, the fund was bolstered by its sovereign underpinned office portfolio. Retail collections remained robust with the collections rate more than 97% reported. Rental concessions of R15 million granted during the period to assist small tenants, especially in the entertainment and food & beverage sectors, was less than anticipated.

Post the reporting period, Rebosis advised shareholders that it has entered negotiations with a few local and offshore institutions and pension funds for a transaction that could fundamentally change the financial matrix of the Group and ‘crystallize’ value for shareholders.

We have seen better than expected retail performance with fewer concessions than anticipated at ten per cent value of concessions done in the first four months of hard lockdowns” commented Rebosis CEO, Dr Sisa Ngebulana.

The fund is now geared for a good restructure through the investment currently under negotiation that will lead to a lower loan-to-value (LTV), an improved interest cover ratio and a stronger balance sheet”.

Our office portfolio remains very robust with no Covid-19 related impact, once again proving its mettle as a defensive play that can withstand the worst cycles.”

The group reported normalised distributable income of R184 million before one-off items relating to the successful conclusion of a dispute resolution process following Rebosis’ acquisition of Baywest and Forest Hill shopping centres in 2016.

New letting escalations of 6.1% and 8.3% were achieved on the retail and office portfolio, respectively, despite low economic growth and weak inflation. A total 13 798m2 of gross lettable area (GLA) was renewed during the period, 11 760m2 of which pertains to retail leases renewed in 49 transactions.

Rebosis retained 96% of its tenants, with portfolio vacancies well contained at 11.5% of GLA, comprising a vacancy rate of 9.5% for the retail portfolio and 12.1% for offices.

Corporate and administration cost reduced 20.7% from R82 million to R65 million on a like-for-like basis, excluding once-offs.

A strong focus on cost containment limited the increase in property expenses to 6.5% on a like-for-like basis, excluding once-offs comprising bad debt write-offs and sale of properties. This increase was mainly due to much higher municipal rates that could not be passed on to tenants in the office portfolio.

Debt reduced from R9.6 billion to R9.5 billion following the disposal of the Medscheme building for R89.1 million during the reporting period. Cost of debt reduced significantly from 8.5% to 7.1% following interest rate reductions. Funding costs are expected to reduce further to 6.2% on the run-off of a historic hedge swap after expiry in October this year.

Rebosis’ LTV is down slightly from 72.4% to 72.2% and the company continues to enjoy support from its funders. Expired debt to the amount of R6.4 billion was consequently renewed during the review period.

Despite the unique challenges we face, it’s business as usual for us, we continue to meet our debt obligations, and importantly, we continue to invest in upgrades of our properties and attract new tenants” commented Ngebulana.

Notwithstanding current economic headwinds and uncertainty around further Covid-19 infections and consequent lockdowns, our portfolio fundamentals remain strong. Going forward we will continue to fill vacancies on renewed retail demand for space, accelerate office lease renewals, strengthen the balance sheet through preservation of cash, and conclude the corporate transaction for the Company to emerge with a strong balance sheet, a low LTV and a healthy ICR.”

To preserve liquidity, the Board of Directors of Rebosis has deferred their decision on an interim dividend to the Company’s year-end in August 2021.