Rebosis’ negotiations on a deal to greatly reduce debt continue
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The immediate outlook for listed property remained uncertain as new variants of the Covid-19 virus were being identified, with possible further waves of the pandemic potentially leading to stricter lockdowns, Rebosis Property Fund said on Wednesday.
Recovery remained dependent on an expedient roll-out of vaccines, the property fund that invests in early stage regional dominant shopping centres and large, single-tenanted office buildings in South Africa said in a pre-close update.
The company is burdened with a relatively high level of debt with loan-to-value (LTV) at 72.2 percent at the end of February - generally, the market is comfortable LTVs of 50-40 percent - but in April it announced negotiations were under way with undisclosed, local and offshore parties on a potential transaction that could take LTV to below 40 percent.
On this potential deal, the company said yesterday that it had signed non-disclosure agreements, but was still in negotiations with institutions and pension funds, and that further details were expected to be announced shortly.
Rebosis B shares climbed 16 percent to 29 cents yesterday afternoon, while the Rebosis A shares were static at 75c.
The company said in the meantime that it continued to operate as normal, meeting financial obligations, generating surplus cash and continuing to invest in value building and defensive capital expenditure.
The executive team had also been bolstered. The annual results for the year to August 31 were expected to be released on or about November 26.
The company said most retailers had reported buoyant sales trends, led by sales in grocery products and healthcare services, despite the country moving back to an adjusted alert level 4 because of third wave Covid-19 infections, as the economy recovered.
However, tenant sustainability, especially in the entertainment and leisure sectors, remained under pressure, made worse by above-inflationary increases in electricity and municipal charges and supply disruptions.
The riots and looting in July had negatively impacted confidence. Insurance premiums were expected to increase substantially because of the riots. However, none of the company’s retail assets were affected by looting.
In the office portfolio, two ground-floor retailers at Schreiner Chambers and West Street Parkade were looted on July 11 and 12 respectively. The looting of small shops was negligible. No offices were affected.
Rebosis said it was working closely with funders to de-leverage the company. There had been no material change to the balance sheet.
Lower interest rates assisted the generation of additional surplus cash reserves, notwithstanding the cash used to help tenants in distress.
Rental concessions in the first half came to R14 million and R5m in the second half, comparing favourably with rental concessions of R70m in the 2020 year.
The office portfolio continued to benefit from tenant exposure underpinned by sovereign leases.
One hundred percent of government rental collections were being collected, which supported the 108 percent of total rental collections (including retail and arrears) for the six months to August 31, 2021.
Collections on retail leases had increased better than expected. Space take-up also improved on the rebound of retail turnovers.
In addition, focused asset management initiatives had added new brands to the Fund’s retail spectrum of top brands.