Property Flash


Rebosis Property Fund’s collapse comes after a litany of errors. The fund which was the first black owned and managed landlord to list on the JSE in 2011, announced last week that it had entered into business rescue. It had been struggling to manage a large debt pile for years and was also battling to sell assets to store up cash reserves.

No business rescue practitioner was named when Rebosis announced its dilemma, via the JSE’s stock exchange news service, on Friday August 26 2022. Rebosis has for years rented space to government tenants with the attraction being that sovereign leases are reliable as government tenants are unlikely to default, unless the whole government has a blowout.

Rebosis has argued that state tenants often are slow payers which placed pressure on its cash flow. This is even though not all of its tenants have been state organisations. But the reasons for Rebosis’ fall are multi-pronged and have persisted for years.

Sudden changes in strategy including an expansion abroad as well as the slow payments from sovereign tenants, all led to unmanageable costs for the real estate investment trust (Reit). The company appeared to be a fund which could pay dividends to its investors for years to come, when it listed. But about a decade later, it lies in a difficult position.

The group hasn’t been able to sell its office portfolio which it deemed secondary to its retail assets. The goal was to sell its offices in order to raise cash to pay off debts which at one stage stood at R10bn. The Reit battled to find a buyer or a consortium of buyers. Its offices are a mixed bag in that some are leased to government tenants with short term maturities and others are leased to large businesses. These state tenants didn’t want long leases because they were often local government entities and their tenure was short and sporadic.

The concern with having such hefty debt levels is that Rebosis has battled to pay the interest related to the debt. It may have suited Rebosis to delist back in say 2020 just before the pandemic but now it’s in a maybe untenable situation.

Initially Rebosis’ founders wanted the fund to be a diverse listed landlord on the JSE. Then, years later, CEO at the time, Sisa Ngebulana, shifted the group’s strategy such that it would become a retail-focused company.

Things did look healthy around 2015 and 2016. Rebosis built up a controlling stake in New Frontier Properties, a UK mall owner with assets in secondary cities such as Blackpool, Burton upon Trent and Middlesbrough.

But soon Rebosis faced a storm of problems. The listed property sector felt the brunt of the Redefine stable of companies scandal. Resilient, Fortress, Nepi Rockcastle and Greenbay Properties had had various connections with one another, including cross shareholdings and common directors, which prompted certain investors, activists and financial groups to raise red flags.

There were concerns over related party deals and that the groups were trying to boost profits and dividends artificially. This led to a large sell-off in the Resilient stable’s property stocks and off stocks in the sector overall. The listed property sector lost more than R100bn in market value between 2017 and 2018.

After this, Rebosis faced Brexit as the UK voted to leave the EU. This placed downward pressure on the value of New Frontier Properties’ assets. Rebosis also confused investors when Ngebulana announced Andile Mazwai as his successor from October 2017.

A few months later, in April 2018 Mazwai resigned, having been pushed out after he spoke of a completely new strategy at a results presentation at Summer Place. Mazwai claimed Rebosis wanted to develop Forest Hill Centurion into a mixed-use node. Rebosis would also move its head office from Monte Circle Fourways to the node.

The sudden change of strategy confused investors. Ngebulana had for at least two years said that he wanted Rebosis to be a shopping centre landlord only. It would sell its office portfolio and not invest in new offices. In fact he said Rebosis needed to become a blue chip retail landlord like Hyprop Investments, the owner of Hyde Park Corner, Rosebank Mall, Clearwater Mall and The Glen.

Ngebulana would stay on and earn his CEO salary and remuneration for being non-executive chairman. This alarmed some directors in terms of governance while Rebosis looked for a new CEO. He also continued to head Billion, the developer which sold assets to Rebosis.

One controversial deal was in 2016 when Billion announced it would sell malls and property management businesses to Rebosis for R6bn. Critics didn’t like the pricing. The deal was slightly changed with certain malls removed from but Billion and its directors, including Ngebulana, were still rewarded handsomely. Rebosis added Baywest Shopping Centre and Forest Hill to its portfolio.

Then the pandemic broke in 2020, placing pressure on all Reits and Rebosis had limited room to recover.

Rebosis’ proposed mergers with Texton Property Fund and with Delta Property Fund, which could have brought liquidity, also failed. Ngebulana was at one stage the largest shareholder in Rebosis, with 5.8% of the company.

His investment plunged from around half a billion Rand to a few million Rand, in the wake of the Resilient scandal, Brexit and the pandemic.

Ngebulana may have inspired many and helped young businesspeople and entrepreneurs throughout his multi-decade career, but he has now been in a pickle for years.

His career began brightly. After qualifying as a lawyer in the 1980s, he worked as Eskom’s legal counsel as SA entered democracy in the 1990s.

He then started developing upmarket cluster-homes. He also converted rundown buildings in downtown Johannesburg into offices. This led to him starting his property development group, Billion, which opened its doors in 1997. Billion eventually developed East London’s first regional mall; Hemingways. Rebosis finally listed on the JSE in 2011 at a value of R3.3bn, having bought a portfolio from Billion, rewarding Ngebulana personally.

Rebosis’ asset value grew to around R16bn by 2020 but it now sits in a position where its investors have fled and have made a noise doing so. Investors voted down the company’s remuneration policies in 2019, 2020 and 2021.

They said they wanted to see long term incentives and wanted to be able to trust management. Given that Rebosis is now in business rescue, a sense of limbo persists until a practitioner is appointed who then needs time to draw up a report.

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