Roy Cokayne

A merger of Rebosis Property Fund, Delta Property Fund and Ascension Properties made strategic sense, especially as each of the listed property funds was effectively aiming to attain similar objectives, Rebosis chief executive Sisa Ngebulana said yesterday.

A simmering hostile takeover battle between Rebosis and Delta for control of Ascension Properties appeared to have been averted in February when the three companies announced their intention to explore a merger and signed a written co-operation agreement.

This followed Delta and Rebosis earlier that month both announcing details of shares acquired or secured in Ascension and both claiming to have valid agreements for the acquisition of Ascension Management Company.

Rebosis also announced it had acquired 29.05 percent of Ascension’s B-linked unit capital, which represented 15.96 percent of Ascension’s total issued linked unit capital as part of the fund’s strategy to bulk up its portfolio.

Ngebulana said Rebosis was in ongoing negotiations with Delta and Ascension to merge the three funds. He said the merged portfolio would create the largest black-managed and substantially black-owned listed real estate investment trust.

Ngebulana added that the combined entity would enjoy a unique position for future strategic growth, with an anticipated combined market capitalisation of about R9.5 billion.

He said the quality portfolio would also offer balanced exposure to retail, office and industrial assets with secure income streams underpinned by long-term government and other empowerment-sensitive entities’ leases, low vacancies and strong anchor tenants.

Rebosis’s distribution a linked unit grew 9 percent to 48.50c in the six months to February from a year earlier, it said yesterday.

Ngebulana said this growth was mainly attributable to better portfolio fundamentals, a decrease in the overall cost of funding to 8 percent from 8.5 percent and continued operating efficiencies across the portfolio.

“We are pleased to have delivered on our growth objectives despite a tough economic environment marked by interest rates and sector vacancies on the increase,” he said.

“Our property portfolio continued to grow over the past six months, supported by the transfer of the Nthwese portfolio, which had a positive impact on our office portfolio.

“We believe the long-term leases in place with the government acts as an income risk mitigator for investors due to their predictable revenue streams. The transaction also spreads risk in our overall property portfolio and together with the acquisition of the Ascension linked units and Ascension Manco, diversifies the overall investment basket within Rebosis.”

The value of Rebosis’s 414 398m2 portfolio increased by almost 3 percent to R6.59bn in February from R6.4bn in August last year. By value, it comprises 45 percent retail, 53 percent office and 2 percent industrial properties.

Ngebulana said Rebosis’s board had reaffirmed the forecast distribution of between 97c and 99c a linked unit for the year to August, which did not take into account the effects of the possible merger of Rebosis, Delta and Ascension.

“We remain confident about the performance of the fund given our strong office portfolio fundamentals combined with strong turnover growth in the retail sector. Demand for space is strong, vacancies are low and operating costs are well managed.”

Rebosis’s linked units rose 3.51 percent to R11.50.