At a time when SA’s large shopping malls are losing their lustre owing to hard-pressed consumers scaling back on retail therapy and the glut of malls already in supply, Rebosis Property Fund is looking to grow its exposure to the sector.
Rebosis, which owns a retail property portfolio valued at R3.9 billion made up of its flagship 73 497 square metre Hemingways Mall and 35 382 square metre Mdantsane City in East London, plans to nearly double its retail property exposure.
The company’s retail property exposure makes up 55% of its total property value of R8 billion for the six months to February 29. CEO Sisa Ngebulana tells Moneyweb that in the long term (about 18 months) the fund plans to grow its retail exposure to about 80%.
The counter invests in dominant regional shopping malls that are in township areas. Its shopping malls are proving to be more resilient than large malls in urban areas, which are suffering from the competition of new malls supplied to the market.
Ngebulana says the company is considering retail acquisition opportunities at the moment, which upon conclusion will further entrench its position in the sector. The acquisitions could come from the Billion Group, which manages Rebosis’ retail, office and industrial properties. The Billion Group has four shopping mall developments underway, some of which include the 58 808 square metre BT Ngebs Mall in the Eastern Cape and the 25 000 square metre Forest Hill Value in Centurion. Rebosis has the right of first refusal to acquire the shopping malls from the development pipeline of Billion Group.
CFO Kameel Keshav, says the fund is treading carefully in terms of its planned acquisitions given the state of the South African economy. Keshav says smaller shopping malls have opened in proximity to its malls which remain unaffected.
Ngebulana adds: “Even if new malls come online in the market, it’s not going to match the offering that we have. When times are tough consumers stop spending on discretionary items like going to restaurants and entertainment centres. We change the tenant mix at our shopping centres to have essential item retailers who offer food and clothing.” He adds that about 98% of its tenants are essential item retailers.
The company’s efforts seem to be paying off. Trading densities or sales per square metres – a key metric generally used in the property sector to determine the strength of retail sales – for Rebosis’ malls saw an average growth of 15%. Most of its shopping malls are recording trading density growth of double digits, with the best performer being Mdantsane City. The mall posted a 23.6% growth in trading densities of R32 724/square metre.
Its 25 338 square metre Bloed Street Mall in Pretoria has staged a turnaround, as in recent years trading densities were in negative territory to now reporting growth of 15.7% due to refurbishments. The company built a bridge at Bloed Street Mall, linking the east and west end wing and introduced more retailers, bringing more foot traffic.
Vacancies for Rebosis’s shopping malls increased from 3.1% to 3.4% due to the liquidation of the Platinum Group, which owns well-known brands such as Aca Joe, Jenni Button, Hilton Weiner, Vertigo and Urban. Platinum Group occupied space of about 1 300 square metres at Hemingways Mall, which Ngebulana says has already been relet at a slightly lower rate. Rebosis also achieved growth in rental escalations of about 7.4%.
Rebosis also has exposure to shopping malls in the UK, given its 67.5% stake valued at R3.8 billion in rand hedge shopping mall owner New Frontier Properties. The company owns shopping centres valued £282 million (R5.8 billion). CEO Mike Riley says refurbishments may take place to grow more retail space at its three shopping centres: Cleveland Centre in Middlesbrough; Coopers Square in Staffordshire and Houndshill Shopping Centre in Blackpool.
Rebosis grew its dividend pay outs to investors by 8.3% to 56.79 cents per share.