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Rebosis resolves valuations dispute with auditors

Restatement of 2019 results ensures clean audit for 2019 and 2020 financial years.
Sisa Ngebulana, founder and CEO of JSE-listed Rebosis Property Fund. Image: Moneyweb

Debt-laden Rebosis Property Fund – which has a record South African listed property sector loan-to-value (LTV) ratio of 72.4% – has resolved its differences with its auditors BDO South Africa Incorporated over property valuations.

During a results presentation on Friday for its financial year ended August 31, 2020, the group revealed that its portfolio had been written down from R15.6 billion to R13.2 billion for its 2019 financial year. The dispute around valuations led to BDO South Africa giving the group a qualified audit last year.

But the matter has now been resolved, with Rebosis accepting the R2.4 billion devaluation, which has effectively resulted in the group now getting a clean audit for both its 2019 and 2020 financial results.

Read: R114m puts Ngebulana back on top as largest Rebosis shareholder

This has however seen the group’s LTV for the year to the end of August 2019 being restated from 64.5% to 75.7%. For its 2020 financial year, the group’s LTV has been reduced to 72.4% with the disposal of Mdantsane Shopping Centre to Vukile Property Fund as well as an ‘increase’ in valuations.

“Rebosis has resolved its differences with its auditors, which has seen a rebase in valuations,” said Rebosis founder and CEO Sisa Ngebulana. “This has resulted in a clean audit being issued for our 2020 financial year, as well as a revised clean audit on the 2019 financial year numbers.”

The group had to delay the release of its latest financial results by a few days last week due to the issue.

Read: Rebosis delays FY results in hope of an unqualified audit

Despite the “differences” with its auditors over last year’s valuations, Rebosis now seems to be trumping up the rebasing of valuations, even with its LTV effectively spiking further.

“Our decision to significantly write down and restate our portfolio in the prior financial year stood us in good stead,” Ngebulana noted in a media statement on the group’s latest results.

“The write-downs were mainly as a result of poor economic activity on retail and outstanding office lease renewals that impacted on the valuation of our properties. Those leases have now been renewed, resulting in a R391 million increase in asset value, based on the restated numbers,” he said.

“The rising valuation trajectory of our portfolio is countercyclical to the market and as a result of it bottoming out in the prior financial year. This augurs well for the future,” added Ngebulana.

Rebosis, which faced financial woes even before the Covid-19 crunch, is not declaring a dividend for a second consecutive financial year (to the end of August 2020).

Its market cap has plunged more than 95% over the last three years.

Rebosis share price

While SA’s deteriorating economic and property market conditions have contributed, the stock has been hit by the group’s failed venture into the UK and overpaying for local retail assets such as Forest Hill City Shopping Centre (Centurion) and Baywest Mall in Nelson Mandela Bay (Port Elizabeth).

Read: Rebosis expects to retain Reit status, despite paying no dividend

The group has a dual A- and B-share structure, with its overall market cap currently at just over R210 million.

Though its portfolio – made up of retail and office property assets – is valued at more than R13 billion, Rebosis’s debt stood at just over R10 billion last year. Considering that the group has breached its debt covenant levels, some analysts and minority shareholders have asked why major lenders like Nedbank have not “called in” its loans.


The group is looking to dispose of its office portfolio and needs to sell around R6 billion worth of assets to bring its LTV to below 40%.

It has around R1 billion of assets currently “held for sale”.

For its 2020 financial year to the end of August, Rebosis settled R500 million in debt, largely due to the disposal of Mdantsane Shopping Centre. This has seen the group’s total debt being reduced from R10.1 billion to R9.5 billion.

“We have had our disposals delayed by the Covid-19 lockdowns and will now accelerate our efforts with our disposal strategy and will only sell if we get fair value,” said Ngebulana.

“We are currently in advanced negotiations on many of our office assets, and I am confident that our LTV will reduce dramatically if all these negotiations prove successful.

“These disposals, along with the increase in our valuations and our efforts to preserve cash, will reduce LTV to acceptable levels,” he stressed.

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Who are these mysterious ‘minority’ shareholders who are reportedly asking the lender why the lender does not ‘call the loan in’? I can understand if the analysts ask a question. But to have analysts whose job is to analyze, but not to direct and or to protest the bank’s investment strategy, raises the question of whether these so-called analysts are not trying to live a self-fulfilling prophecy. They should not be allowed to put unnecessary pressure on the lender (bank), with their persistent hurangueing of the bank to ‘toss’ Rebosis. The bank has seemingly looked into the numbers and regards Rebosis as viable and likely to come of out this situation. in contrast to these arm chair critics and doomsday sayers, masquerading as so calle minority shareholders and analyssts. As an investor in Rebosis, I am confident that these so called minority shareholders can sell the stock if they don’t want to be complaining all the time. They should try that and leave us alone as management turns the ship around.

What a stupid thing to say. Analysts are supposed to ask the hard questions. If you are an investor with half a brain you would ask these questions yourself before investing.

“Assets such as Forest Hill” what a dog show of a centre, hasnt been fully let once since it had the misfortune of opening its doors, shops closed with “back in 5 min” notes in window but should read “see you next week” because they never open, soon the only share holders here will be the banks holding the debt.

I invested in Rebosis and was pleased that I did. I am really please not to be an investor in Rebosis today yet I do wish them the best.

End of comments.





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