September 27 2023
By Alistair Anderson
Rebosis Property Fund, the office owner is facing an inevitable death in the next few months.
The group which has struggled to pay interest costs on close to R10bn in debt is coming to the end of a business rescue process which began in August 2022. It announced on Wednesday that it would sell a portfolio of properties for a total R160m.
“Rebosis is now in a position to confirm that in terms of the public-sales-process it entered into a portfolio sale agreement between Phahlani Lincoln Mkhombo and Jacques du Toit N.O., in their capacity as duly appointed joint business rescue practitioners of Ascension Properties (also in business rescue) and Katleho Property Investments,” Rebosis said.
Ascension is a subsidiary of Rebosis.
The latest properties to be sold are valued at R291m, according to information released by Rebosis in April 2023.
These include three office buildings in Ekurhuleni and one office building in Midrand with a total gross lettable area of 28,122m².
The latest deal follows an announcement in August 2023, where Rebosis said it would sell 27 properties for around R7bn. Then in September, it announced it would sell a further 10 for R650m.
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 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. Fund managers prefer for LTVs to be below 40%.
Following years of mismanagement, bad deals and shoddy luck, Rebosis looks like it has no future. 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 the 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.
But then he appointed banker Andile Mazwai as his successor as CEO, who announced at a results meeting that the fund wanted to own precincts which included retail, residential and office assets. Mazwai was later fired.
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 slow payments 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.