Property Flash


August 23 2023

Almost exactly a year after struggling Rebosis Property Fund entered business rescue, the process’ practitioners have announced two deals to sell chunks of the group’s assets. It’s curious as to why the buyers have faith in the embattled fund’s properties especially its state-tenanted offices which need revamps and longer-term leases.

Should the deals be completed, the incoming funds will be used to service Rebosis’ high interest payments. Rebosis will likely be delisted and the business rescue practitioners will need to ascertain if the company can continue as a going concern, which is unlikely.

The practitioners said 27 properties would be sold. The first deal would see the Gusi Trust acquire R3bn of properties. The trust was formed by the CEO of JSE-listed Heriot Reit, Steven Herring. Then Ferryman Capital Partners, Hulk Investments, Jade Capital Partners and the beneficiaries of the Ubuntu Football Trust would acquire a R3.5bn mixed property portfolio and the R420m Bloed Street asset. This is collectively known as the Hangar 18 portfolio. The disposals includes five shopping centres worth R5.9bn: Bloed Street, Sunnypark, Forest Hill, Hemingways Mall and Baywest. Offices in Johannesburg, Pretoria, Nelspruit and Pietermaritzburg are being sold as well as a student accommodation building in Mafikeng.

It’s unclear if Herring will put offices into Heriot Reit’s portfolio. Heriot has tended to own a mix of retail assets and recently gained control of township and semi-urban mall owner, Safari Investments.

The proceeds for the sales also need to reduce Rebosis’ debt, so it can ease its loan-to-value (LTV) level from more than 75% to closer to 40%. LTV measures a group’s debt compared with its asset base. Transfers are expected to take place on February 21 2024.

Rebosis entered business rescue on August 26 2022 following years of mismanagement, bad deals and shoddy luck. The group was the first majority black-owned and managed property fund to list on the JSE in 2011, having been formed in 2010 by Sisa Ngebulana and his support team, with assets worth R3.3bn. At the end of February 2022, Rebosis owned 41 office and retail properties worth R13bn.

Initially Rebosis invested in government-tenanted offices, industrial properties and then retail when it bought Hemingways Mall, an East London shopping centre from the Billion Group. Billion is a development company which was also formed by Ngebulana. Years later he sold Port Elizabeth retail centre, Baywest and Centurion mall, Forest Hill, to Rebosis. The deal was controversial given its price and also that Ngebulana appeared to overly rewarded, receiving transaction fees and also his CEO salary.

Rebosis’ fall was worsened when it invested in New Frontier Properties, a UK landlord which owned smaller retail centres in secondary towns like Blackpool and Blackburn. Ngebulana had spoken about how he wanted Rebosis to be entirely invested in retail assets. He said he wanted to emulate the likes of Hyprop Investments, a mall specialist landlord in South Africa.

Brexit, where the UK left the European Union, had an immediate negative effect on UK real estate. Commercial property values weakened placing pressure on New Frontier. Rebosis spent R1.2bn on 62% of New Frontier and later sold its final 49.4% stake for R700. Slow rental payments by government tenants harmed Rebosis’ cashflow.

All of these issues as well as the scandal around the Resilient group of companies which caused investors to lose faith in the underlying net asset values of commercial property funds in SA as well as the Covid-19 pandemic weakened Rebosis. The company found itself in business rescue with R9.5bn in debt by the end of February 2022. The majority of this debt lies with Nedbank.

Nedbank responded to questions from Property Flash.

“Rebosis is currently in business rescue. We have been working with the business rescue practitioners throughout the business rescue process in the development of a business rescue plan for the company. As outlined in the various SENS announcements issued by Rebosis, the public sales process of its assets commenced in May 2023 and is expected to be concluded in August 2023,” it said.

“Nedbank’s exposure to Rebosis at circa R8,1bn is secured by a portfolio of 27 commercial and retail properties. Any loss that Nedbank may suffer will be the difference between its exposure and the realisation values of the properties that it holds as collateral,” the group said.

The business rescue practitioners, Phahlani Mkhombo of Genesis Corporate Solutions and Jacques du Toit of DTB Business Rescue said they did not think that Rebosis generated enough cash to cover its operating expenses, including interest payments and that its working capital was insufficient to meet day-to-day operating requirements.

“The company has entered into post-commencement finance arrangements with certain of its creditors to enable the Rebosis Group to continue operating, pending conclusion of the public sales process,” they said.

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