Rebosis’ low risk, high growth portfolio delivers solid results

Posted On Thursday, 16 April 2015 10:22 Published by
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Rebosis Property Fund today reported solid interim financial results for the six months ended 28 February 2015, ahead of its forecast range.


Sisa Ngebulana

  • 8.2% distribution growth to 52.46 cents per linked unit for the period
  • Net property income up 10,1% to R291 billion
  • Assets under management up 12,4% to R7.9 billion
  • Net cost to income ratio down to 12.7% from 13.6%


 The Fund declared an interim distribution of 52.46 cents per linked unit for the period (H1 2014: 48.50 cents per unit), up 8.2%, which is above the upper range of the targeted forecast of 52.38 cents. Rebosis Chief Executive, Sisa Ngebulana commented: “We are very pleased to have exceeded our growth objectives in challenging circumstances. What makes this even more significant is that there were no acquisitions during this period – our continued focus on operating efficiencies and better portfolio fundamentals were the key drivers of our performance. 

“The team did a really good job in managing expenses, decreasing the overall cost of funding and optimizing the portfolio.” Property expenses continue to be well contained with the net cost to income ratio down to 12.7% from 13.6% in the comparative period.  Receivables continue to be tightly managed with a provision for bad debts at R7.9 million calculated on an ageing and specific identification basis to ensure accurate provision.

The average vacancy across the portfolio remained exceptionally low at 2.2% of the total portfolio by gross lettable area (GLA) whilst the weighted average lease expiry profile was four years, mainly as a result of long-term government leases in the office portfolio and the successful conclusion of lease renewals at Hemingways Mall, the largest super regional mall in East London. The property portfolio was independently valued at R6.99 billion (H1 2014: R6.59 billion), an increase of 6.2%.  The current portfolio consists of 19 properties with a total GLA of 414 390m² and is diversified across Gauteng, the Eastern Cape, KwaZulu Natal, and North West Province. The portfolio comprises 44% retail, 54% office and 2% industrial, by value.

The retail portfolio consists of four high quality shopping malls underpinned by strong anchor and national tenants delivering secure income streams escalating at 7.4%. The expansion and tenant mix optimisation programme at Hemingways Mall, the largest centre in the portfolio, has been completed. It positions the mall for exceptional growth as the unmatched entertainment node in East London now boasting a go-kart circuit. 

The office portfolio consists of 14 buildings which are well located in nodes attractive to government tenants. These are mainly single tenanted buildings let to the National Department of Public Works under long leases providing average escalations of 8.5%. The office portfolio represents a sovereign underpin to a substantial portion of the earnings and shields it from private sector risks such as tenant insolvency and default. 

Rebosis announced on 24 February 2015 its firm intention to acquire 100% of the issued linked unit capital of Ascension that it does not already own, which will result  in its portfolio value increasing to more than R11 billion (excluding New Frontier). The majority of these assets are located in the central business districts of Johannesburg and Cape Town, which further entrenches Rebosis as an empowered landlord of choice in the Johannesburg node and brings important regional portfolio diversification into the strategic node of Cape Town.

“We are pleased with this transaction, following our strategic acquisition of Ascension’s management company last year. As part of that process, we also acquired a 32% stake in Ascension. “We believe that the sector has entered a cycle where REITs with smaller market capitalisation and less liquidity in the trade of their shares will increasingly be driven to consolidation and corporate action to best serve the interest of their tenants and investors,”  added Ngebulana.

Rebosis also recently acquired New Frontier Properties  Limited on 26 March 2015. This acquisition was  post this reporting period and has not been included in the financial statements. New Frontier focuses exclusively on the UK retail property market. Its current portfolio consists of two retail centres in Burton-upon-Trent and in Middlesbrough, both located on the High Street of the CBD. The two centres have a combined total retail sales area of 74 300 m2 with over 180 tenants, including prominent UK and international brands such as Boots, Marks and Spencer, H&M, Top Shop, WB Smith and others. The combined annual footfall is around 21 million visitors. 

Ngebulana added, “Our investment in New Frontier affords Rebosis the opportunity to access offshore retail property exposure and to participate in a UK investment which provides attractive GBP forward yields of 7.01%.” Commenting on the company’s prospects, Ngebulana concluded:  “Given our high-growth, low risk portfolio of assets we remain bullish on the performance of the fund. We have a balanced exposure to retail, office and industrial property. Operating costs are well managed and we foresee long-term capital appreciation.


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