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Rebosis reports 9% distribution growth

Rebosis chairperson Dr Anna Mokgokong and CEO Sisa Ngebulana discuss the company's interim results. Camerawork & editing: Nicholas Boyd. Recorded: 24/04/2014.

24th April 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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JSE-listed real estate investment trust (REIT) Rebosis Property Fund increased its distribution growth by 9% to 48.5c a linked unit for the six months ended February 28, as a result of better portfolio fundamentals and a decrease in the overall cost of funding, Rebosis CEO Sisa Ngebulana announced on Thursday.

The group’s overall cost of funding declined to 8%, from 8.5% during the prior corresponding period, while net property income increased by 42.9% to R264.56-million on the back of acquisitions made by Rebosis.

During the period under review, Rebosis increased its assets by 51% to R7.01-billion, and grew its market capitalisation by 18.1% to R4.37-billion.

“We are pleased to have delivered on our growth objectives despite a tough economic environment marked by interest rates and sector vacancies on the increase,” Ngebulana said, pointing out that the company’s property portfolio continued to grow over the past six months, supported by the transfer of the Nthwese portfolio, comprising five recently refurbished high-quality properties let to the Gauteng provincial and national government, which had a positive impact on Rebosis’ office portfolio.

Currently, Rebosis had 19 properties consisting of 414 398 m2 gross lettable area in Gauteng, the Eastern Cape, KwaZulu-Natal and the North West.

The group’s portfolio by value comprised 45% retail, 53% office and 2% industrial space.

The retail portfolio included four high-quality shopping malls underpinned by strong anchor and national tenants delivering secure income streams, escalating at 6.3%, while the office portfolio now consisted of 14 buildings, which were well located in nodes attractive to government tenants.

These were mainly single tenanted buildings let to the Department of Public Works under long leases providing for average escalations of 8.2%.

The office portfolio represented a sovereign underpin to a substantial portion of its earnings and shielded Rebosis from private sector risks such as tenant insolvency and default.

As at February 28, 2014, vacancies for the company’s total portfolio stood at 2%, reflecting a high occupancy rate, Ngebulana pointed out.

Further, during February, Rebosis had acquired REIT Ascension Property Management for an aggregate purchase price of R150-million, along with 29.05% of Ascension’s B linked capital, which represented 15.96% of the company’s total issued linked unit capital.

This acquisition formed a part of Rebosis’ strategy to bulk up its portfolio.

In terms of this strategy Rebosis was also in ongoing negotiations with Ascension and REIT Delta Property Fund to merge the three funds.

Ngebulana said Rebosis was currently completing its due diligence with regard to the proposed merger and hoped to be able to close the transaction soon.

Meanwhile, during the six-month period, Rebosis’ net borrowings increased to R2.475-billion as a result of the Nthwese and Ascension acquisitions, which increased the gearing ratio to 35.3% from 25.3% at August 31.

The weighted average cost of borrowings was 8% for the period under review and at February 28, interest rates in respect of 75% of the group’s borrowings had been hedged.

The average term of the remaining debt was 2.7 years.

FUTURE OUTLOOK
Ngebulana said Rebosis remained confident about its future performance given its strong office portfolio fundamentals combined with strong turnover growth in the retail sector.

He added that expansions and tenant mix optimisations planned by Rebosis would further strengthen its retail centres for exceptional growth.

With regard to the fund’s future pipeline, Ngebulana pointed out that its 73 588 m² Forest Hill Shopping Centre, in Monavoni, Centurion, would open on May 29, followed by the opening of the Bay West centre, in Port Elizabeth, in March next year and the Mthatha Mall, in the Eastern Cape, in April 2015.  

“We will [also] continue to pursue [high-]quality growth opportunities without necessarily coming to market,” he said.

Ngebulana also reaffirmed the company’s forecast distribution of between 97c and 99c a linked unit for the full year ending August 31.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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