December 13 2022
It appears that Rebosis, the listed real estate investment trust (Reit)’s business rescue is dire. The company which owns sovereign tenanted offices as well as Baywest Shopping Mall in Port Elizabeth and Hemingways Mall in East London is drowning in debt and is likely to be wound up in 2023.
Rebosis’ business rescue practitioners: Jacques du Toit of DTB Business Rescue and Phahlani Mkombo of Genesis Corporate Solutions were appointed on August 31 to restructure the company and ensure the company’s survival. If they couldn’t they’d have to sell off its assets so that its creditors could get some portion of funds owed.
The practitioners were supposed to publish a business rescue plan 25 days after their appointment. But they were granted an extension and had said the plan would be released in November. The joint business rescue practitioners are now requesting an extension to January 20 2023.
It looks increasingly like Rebosis’ assets will be sold in fire sale fashion.
The group which was listed on the JSE by its former CEO, Sisa Ngebulana in May 2011, with assets worth R3.3bn, in early 2022 had a portfolio worth R13bn and bank debt of R9.5bn. Problematic capital allocation, the 2008-9 listed property scandal around the Resilient group and issues with government tenants paying late all lead to Rebosis’ failure. It spent around R1bn on a controlling investment in New Frontier Properties, a UK secondary mall owner but then sold its stake for R700. The company blamed Brexit for this investment failing. There have been concerns around the payment structure for the shares in New Frontier as well as tenant allocation and the management of New Frontier’s malls.
The interest expenses on its severe debt became unmanageable for Rebosis. With a loan-to-value (LTV) of 73% based on these numbers, the group’s financial position sat in severe distress. Some critics even argued that Ngebulana and his team had overvalued Rebosis’ properties and that the LTV was closer to 85%. While in the US and Europe, property funds are more highly geared than their counterparts are in SA, Rebosis’ LTV is worrying. South African fund managers prefer for LTVs to sit at 40% maximum. Some 80% of Rebosis’ debt is with Nedbank.
While Nedbank is not calling in the debt yet, it’s hard to see how Rebosis can remain listed as it battles to pay interest expenses and municipal fees.
alistair@propertyflash.co.za