Rebosis Property Fund, the JSE’s first listed black-managed REIT, has posted a solid set of results thanks largely to a focus on mainly driving a robust improvement on its operating performance and the quality of underlying assets from its asset management team.
Rebosis reported its results for the year ended 31 August 2019.
The Fund reported operating performance with a 100% success rate of lease renewals on large office expiries of over 200 000 GLA in the reporting period, a good trading density as well as robust footfall growth in its retail assets, well above IPD averages.
Dr Sisa Ngebulana, Rebosis’ CEO commented:
“This reporting period has focused mainly on driving a robust improvement on our operating performance and hence quality of our underlying assets from our asset management team.
“Our average growth performance matrix on retails assets continue to outperform IPD growth benchmarks in all areas and this is on the back of bold drives in our marketing and overall management.
“We have incredibly dominant and scarce retail assets and our office assets are well maintained and the positive renewal cycle bears testimony to well looked after buildings and tenants.
“We have made excellent achievement with office renewals, concluding all expiring leases totalling 202 574m2 of GLA and achieved an average 6.4% annual escalation. The 60 907m2 renewals remaining relate to historic leases of four buildings with City of Tshwane, Western Cape Province DPW and KZN Province whose tenants are in occupation and should conclude negotiations in the next 6 months.
“The focus now turns to fulfilling our intent on disposal program as several disposals announced during the year were contingent on the renewal of leases, and with these now achieved, we are confident that the disposals will be concluded in this current financial year.
“The current high LTV will be dealt with as first priority this current year on the back of the lease renewals which bodes well for retaining retail assets.
“Given current market conditions, there is a huge emphasis on balance sheet strength, and the board deemed it prudent to retain distributable income in order to preserve capital and hence assist with the deleveraging of the business.”
Total distributable earnings declined by R101 million to R226 million, mainly due to historic bad debts being written off, taxation of R38 million payable on the retained distribution, increased professional fees relating to property disposals and the early settlement of cross currency swops.
Notwithstanding Rebosis’ rebase in earnings, the underlying retail portfolio continued to perform well, reporting trading density growth of 5.4% and an increase in footfall of 2.5%, indicating market share gain despite vacancies increasing by 6.5%.
The Fund’s regionally dominant centres, Baywest Mall in Port Elizabeth and Hemingways Mall in East London performed well, reporting trading densities of 8.1% and 5.1% respectively, against an IPD average of 1.1% for the sector.
“Despite the tough economic climate, leasing activity at Forest Hill continued steadily with a 75% success rate. 15 927m2 of leases were renewed against a total expired GLA of 23 090 m2. New leases of 2 017m2 GLA were concluded during the year under review, with leases totalling a further 1 250m2 expected to be signed imminently,”elaborated Dr Ngebulana.
Going forward, the Group indicated that it will continue to focus on operational efficiencies, including the ongoing renewal of office leases, the conclusion of disposals on the back of lease renewals, the de-leveraging of the balance sheet from its current 60.9% by way of a capital raise on the conclusion of the merger with Delta Property Fund.