Rebosis continues solid performance, expanding it’s high growth and defensive portfolio

18 April 2013 – Rebosis Property Fund today posted solid interim financial results for the six months ending 28 February 2013.

Headline profit of 61,29 cents per linked unit was reported, up 27,5% on the 46.09 cents per linked unit declared for the prior comparable period. On 26 March this year Rebosis declared an early distribution of 44.50 cents per linked unit for the period under review, which represents an increase of 3,5% on the distribution of 43.0 cents per linked unit for the comparable period. The early announcement and resulting early payment of the distribution was in terms of a commitment made pursuant to the successful rights offer implemented on 4 February this year, from which Rebosis raised R650 million.

The total return to linked unitholders for the 12 month period ended 28 February 2013 of 30,1% comprises an income return of 9.0% and a capital return of 21.1%.

Rebosis Chief Executive, Sisa Ngebulana commented: “Our strategy of growing the portfolio and distributions through investments in high-quality retail and commercial properties is delivering according to plan.

“Despite increasing pressure on consumer expenditure, turnover growth in the retail portfolio grew strongly at 10%. The commercial offices, which are mainly let to national government departments, continue to provide a sovereign underpin to a large portion of the Fund.

“During the review period, we successfully introduced an additional R1,76 billion of new properties into the portfolio, further diversifying the mix and geographical spread.

Rebosis’ portfolio of high growth, defensive assets currently consists of 12 properties – with a total gross lettable area (GLA) of 295 716 m2. By value, the portfolio comprises 52% shopping centres and 48% office buildings. These assets are located in Gauteng, the Eastern Cape, KwaZulu-Natal and the North West Province, minimising concentration risk to an extent. The properties, which were valued by independent valuer Quadrant Properties (Proprietary) Limited, increased in value from R4,540 billion at 31 August 2012 to R4,637 billion at 28 February 2013.

The retail portfolio consists of three exceptional quality, regionally dominant shopping centres underpinned by strong anchor and national tenants. The office component is made up of nine buildings which are well located in nodes attractive to national government tenants. These are mainly let to the National Department of Public Works under long leases with an average escalation of 8,3% per annum. The office portfolio provides a sovereign underpin to a substantial portion of the earnings and shields it from private sector risks such as tenant insolvency and default.

Lease renewal negotiations for the 2013 financial year are well advanced at Mdantsane City and Bloed Street Mall.

“96% of these leases have been renewed and we are continuously improving our tenant mix across the retail portfolio, with a focus on reducing the overall vacancy to below 2%. 5 279 m2 of new space was let and leases in respect of 4 103 m2 were renewed.

“Lease negotiations in terms of the five-year cycle for national retailers at Mdantsane and Bloed Street Mall are also progressing well.” Ngebulana added.

Letting activities, mainly in the retail portfolio further increased the occupancy rate from an already high 96,3% in the comparable period to 98% at the period end.

During the reporting period, Rebosis continued with its mandate to to grow its portfolio and distributions by investing in high-quality retail and commercial properties yielding secure capital and income returns for unitholders.

“We concluded agreements to acquire a number of properties with a total GLA of 114 753 m2 during the reporting period for a purchase consideration of R1,76 billion. This not only increases our portfolio size, but is also yield enhancing.” he explained.

The acquisitions include the Sunnypark Centre, a dominant retail centre in the resurging eastern part of Pretoria’s central business district, as well as a portfolio of four government tenanted offices in well-located nodes in Johannesburg and Pretoria. The acquisition of a 18 954 m2 industrial property marks Rebosis’ first foray into this sector. The property is tenanted under a long-term lease and forms part of the Fund’s strategy to diversify the portfolio to some extent in the long term.

Redevelopments at the Bloed Street Mall commuter centre to the value of R64 million is expected to commence in the current period. The redevelopment will see the linking of the east and west centre blocks across Lilian Ngoyi Street and is supported by a number of national blue chip tenants such as Shoprite, Clicks, Legit and Edgars.

During the review period, Rebosis successfully raised R650 million through an oversubscribed rights offer at R11.20 per linked unit, which included an accrued distribution of 38,6 cents per linked unit for the period to 4 February 2013.

“The rights offer enhances our ability to take advantage of pipeline acquisition opportunities and further strengthen our balance sheet. It gives us the ability to use cash to conclude transactions, which puts us in a stronger position when negotiating.” Ngebulana added.

The proceeds of the rights offer reduced Rebosis’ net borrowings with gearing reducing from 37,9% in the comparable period to 22,6% for the period under review. In line with the company’s debt strategy, 77,5% of the borrowings have been fixed, resulting in an average cost of borrowing of 8,5% for the review period. The average remaining term of the debt is 2,5 years.

Commenting on the company’s prospects, Ngebulana concluded:

“We continue to grow the fund through strategic acquisitions. The early stage retail component has been bedded down well and lease renewals are progressing in line with expectations.

“Our plan is to continue growing the fund, optimise the retail offering in our malls and prudently manage costs during the second half of the financial year.”

The company’s target distribution range for the year ending 31 August 2013 remains at between 92 cents and 95 cents per linked unit, representing growth of between 7,6% and 11,1%.