Rebosis reports profit of R184m on revenue despite tough cycle

The company weathered significant headwinds related to Covid-19 lockdown restrictions bolstered by its sovereign underpinned office portfolio which accounted for 73% of net income due to retail impact and a quicker than expected turn-around at its retail shopping centres post the hard lockdown period.

Rebosis reported an average collection rate of 95% for the year ended which increased to 96% post year-end, indicative of the quick retail turn-around and resilience of the portfolio. The company post a before tax profit of R184 million and, given the board declared not to pay dividends, will pay income tax of R48 million.

"This has been the worst cycle in decades, especially for property sector. Our decision to significantly write down and restate our portfolio in the prior financial year stood us in good stead" commented CEO, Dr Sisa Ngebulana. "The write-downs were mainly because 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".

"The rising valuation trajectory of our portfolio is counter-cyclical to the market and because of it bottoming out in the prior financial year. This augurs well for the future."

The rebased valuations resolve the differences that the company had with its auditors in the prior year, resulting in a clean audit being issued for 2020 financial year as well as a revised clean audit on the 2019 financial year numbers. 

Rebosis settled debt of R500 million during the year under review, following the disposal of Mdantsane Shopping Centre in the prior year. Total debt reduced from R10.1 billion to R9.5 billion, which, together with the increase in asset value, reduced loan-to-value (LTV) from 75.7% to 72.4%.

Rebosis further announced the disposal of its Medscheme building for R91 million, the transfer of which is expected in the current reporting period and will be used to further settle debt.

"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. 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," commented Dr Ngebulana.

The office portfolio renewed 11 870m² of gross lettable area at contracted escalation rates of 6.3%. Negotiations on a further 65 000m² are currently underway as same were delayed by Covid-19 lockdowns.

Rebosis invested R148 million (including bad debt write offs) in support of tenant sustainability during the second half of the year. As a result, no casualties of the pandemic were reported, other than the impact of Edgars and Dion Wired filing for business rescue during the year.

The fund points out that it retained 100% of its retail tenants during Covid-19 because of its support measures and retained over 90% of tenants on lease renewals. Trading density grew by a positive 0.5% on average, despite lost trade during lockdowns.

Rebosis believes that by agreeing to rental concessions, and not deferments, allow tenants to trade from a clean slate going forward, removing uncertainty around the repayment of deferred rentals. 

Vacancy rates subsequently remained stable, at 9.1% of the total portfolio, or 6.4% if buildings currently being converted are excluded.

"Despite the unique challenges we face, it's business as usual for us," commented Dr Ngebulana. "We continue to meet our debt obligations, and importantly, we spent an additional R70m on capex and upgrades to keep our assets attractive for our tenants. Our focus continues to fill vacancies on renewed retail demand for space, strengthening the balance sheet through preservation of cash, accelerated bulk disposals and debt reduction."

To preserve liquidity, the company has not declared a distribution for the year.