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Rebosis declares no dividend for third consecutive financial year

As the debt-laden real estate investment trust (Reit) continues to prioritise deleveraging efforts.
The Forest Hill shopping centre in Centurion Gauteng is one of Rebosis's major regional malls in SA. Image: Supplied

Rebosis Property Fund on Thursday declared no dividend for its full-year ended 31 August 2021 – the third consecutive financial year that the group has opted not to do so.

This comes as the debt-laden property counter continues to prioritise deleveraging the business, especially over the past year with the Covid-19 financial fallout hitting the Reit harder that many of its JSE-listed peers.

“The board deemed it prudent to deleverage the fund and has therefore resolved to not declare a full year dividend for the year ended 31 August 2021 [2020: Nil],” Rebosis said in its result Sens announcement.

Dividend payments or dividend per share is a key metric for the financial performance of SA Reits. According to tax rules, a listed property counter needs to pay-out at least 75% of distributable income in order to retain Reit status.

The decision by Rebosis not to pay a dividend also comes as the group did not meet solvency and liquidity tests, which is a prerequisite for Reits to pay dividends.

The group, founded by property entrepreneur Dr Sisa Ngebulana, reported a 10% slide in net property income on a like-for-like basis compared to its prior (2020) financial year.

Read: Sisa Ngebulana to ‘retire’ as CEO of Rebosis Property Fund

“This is as a result of reversions on the portfolio, as well as increase in rates assessments,” said Rebosis.

“The distributable income before tax [and] excluding once off items [capitalised interest and operating expenses on deferred payment liability] is R83 million,” it added.

Rebosis, which announced a proposed R6.3 billion deal to sell most of its government-tenanted office portfolio in October, however managed to increase its distributable income for its latest financial year.

Read: Rebosis announces R6.3bn sale of its government-tenanted office portfolio

“The higher distributable income is as a result of a decrease in the head office costs of the group to R151 million [2020: R175 million] and the decrease in finance costs relating to bank facilities to R602 million [2020: R828 million], due to the repo rate cuts and the repayment of facilities using the proceeds from the Medscheme sale,” it pointed out.

The fund reported that the fair value of its property portfolio as at 31 August 2021 amounted to R13.1 billion, representing 0.3% growth year-on-year. This excludes the disposal of its Medscheme building.

It comes despite the decline in net property income.

However, Rebosis noted in its Sens results statement that the increase in property valuations “is mainly attributable to successful government lease renewals completed, and the continued strong covenant tenant profile in the retail portfolio with long term lease profile.

“The retail and commercial property portfolio was independently valued at year end, taking into account Covid-19 considerations. During the period, proceeds from the disposal of Medscheme were used to settle Standard Bank facilities to the value of R89.1 million,” it said.

Operational performance

From an operational side, Rebosis reported that its retail portfolio had seen 4.2% average growth for the year.

“Restaurants, entertainment venues and liquor outlets were more negatively impacted by the lockdown restrictions,” it said in a media statement.

“The fund’s Eastern Cape assets showed particularly strong trading density growth of 7.4%, with Gauteng reporting a contraction of 0.2%,” added Rebosis.

The group said vacancies in its retail portfolio accounted for 9.8% of the portfolio, while the Reit’s largely sovereign-let office portfolio reported vacancies of 21.7%.

This resulted in a combined average Rebosis portfolio vacancy of 17.3%, excluding office properties earmarked for conversion to student accommodation.

Rebosis said that rental collections on the portfolio improved to 103.9% for the period, although “the fund was obliged to provide a further R100 million [2020: R148 million] in rental concessions [R27 million] and bad debt write-offs [R73 million] to mostly smaller tenants who continue to struggle with the impact of Covid-19″.

The group pointed out that it did not experience any damage to its retail portfolio as a result of July unrest in Gauteng and KwaZulu-Natal.

Commenting on the group’s performance, Ngebulana (the fund’s outgoing CEO) said despite significant macro-economic headwinds, exacerbated by Covid-19 related lockdowns and the July riots, Rebosis maintained a ‘business as usual’ approach, supported by its solid property fundamentals.

“We continued to meet our debt obligations and invested in new capital expenditure and value enhancement of our assets, whilst maintaining surplus cash in the business,” Ngebulana noted.

“The successful conclusion of the R6.3 billion office portfolio disposal announced post the reporting date will provide momentum to our strategy of deleveraging and optimising the balance sheet. It will reduce our loan-to-value significantly from 71% to approximately 42% in line with acceptable loan-to-value levels for Reits,” he added.

New Rebosis CEO Otis Tshabalala, who came into the role as of December 1, said that the transaction will further restructure the business as a retail focused fund.

“On conclusion of the transaction, we expect to resume dividend payments to shareholders, provided that a stable macro-economic environment is maintained with no material tenant failures or prolonged economic lockdown periods,” Tshabalala added.

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