In the JSE’s listed property sector, investors are spoilt for choice given the recent flurry of new listings. Those with an appetite for global markets can now invest in the UK, Germany, Poland and Romania via the JSE without physically taking their rands offshore. But local property stocks have recently moved on the radar of fund managers as growing rand volatility puts offshore property stocks on the back foot.
Among the counters that have piqued the interest of fund managers is retail-focused real estate investment trust Rebosis Property Fund.
Trading at a forward yield of about 11% compared with the sector’s 7.2%, Rebosis’s stock is ranked as attractive and affordable. So far this year, the stock has delivered a total return of 5.3% (excluding dividends). Says Stanlib’s property analyst Lawrence Koikoi: “The stock looks cheap if income growth can hold up in the medium to long term.”
But income-chasing investors are staying on the fence with its share price falling by nearly 2% since it declared dividend growth per share of 7.1% to 60.8 cents on April 24 for the six months to February.
Rebosis, which was listed in 2011 by CEO Sisa Ngebulana (pictured), has over the last three years repositioned its investments mainly towards shopping malls. This has paid off, as it has grown its property portfolio of retail, government-occupied office and industrial properties to R13.8 billion during the period under review.
Including various shopping mall acquisitions, its investment in UK-focused New Frontier Properties and the recently completed acquisition of Ascension Properties, its total assets have swelled from R11.8 billion to R21.3 billion. Shopping malls now make up 62% by value of its total assets, with Ngebulana adding that the long-term plan is to raise this to 70%.
Rebosis shopping malls, which are dominant in their locations, have remained resilient despite weak consumer confidence and anaemic economic growth, says Ngebulana. But this doesn’t mean that they have been immune to the slump. Underscoring this is that trading densities (a key metric for sales per square metre) grew by a moderate 6% across its shopping malls compared with its historical double-digit growth.
“The market is tough for retailers and consumers, it’s a reality for South Africa.That’s why we are seeing slowing trading densities,” he says.
Rebosis riled the asset management industry last year with its expensive acquisitions, including Baywest City in Port Elizabeth and Forest Hill City in Centurion as well as property management entities Billion Property Services and Billion Asset Managers. The initial acquisition price tag was a hefty R6 billion but was later reduced to R4.9 billion. These deals would add to its existing retail assets including Hemingways Mall in East London, Sunnypark Shopping Centre and Bloed Street Mall in Pretoria.
Baywest Mall showed the highest monthly density growth at 11.6% to R2 363/ m2 while the least growth is at Sunnypark Mall (0.1% to R2 952/m2). Overall vacancies across its property portfolio reached 2.4%. Its shopping malls portfolio, which is valued at R8.6 billion, reported vacancies of 1.5% and rental escalations of 7.4%.
“The operational metrics seems to stack up on the results that were reported with vacancies declining and reversions holding up,” says Koikoi.
Rebosis plans to dispose of smaller properties that are worth R1.5 billion. The proceeds will be used to reduce debt as its loan-to-value sits on the high-end at 41.8%.
Chief operating officer Andile Mazwai says property disposals will allow the company to focus on “big and bulky” office properties that are tenanted by the national government. “This will allow us to enhance the quality of the portfolio through disposals,” he says.
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