This week marks the start of what is likely to be the closing chapter in the spectacular rise and fall of Rebosis Property Fund, as the bidding process for its multibillion-rand portfolio starts.
It was the JSE’s first substantially black-owned real estate fund when it listed 12 years ago. After several last-ditch attempts to salvage the debt-ridden company, it was suspended and placed in business rescue in August 2022.
Rebosis owes banks R9.5bn. The plan is to repay the debt — or at least a sizeable portion of it — by selling its R11.2bn assets (fair-value estimate at end-August) via a “public sales process”.
Jacques du Toit, one of the business rescue practitioners appointed to save Rebosis from liquidation, says no fewer than 50 parties have registered to take part in the sale.
This week bidders have to submit formal “expression of interest’’ letters to indicate which properties they want to buy and at what price. Over the next few weeks, corporate advisory firm Java Capital will adjudicate offers and compile a list of preferred bidders.
Buyers will then have a chance to conduct due diligence and view properties. But it remains to be seen how many buyers will submit binding offers.
The portfolio consists of 35 office buildings, five shopping centres and one industrial building. Some properties have been neglected due to lack of cash for maintenance and refurbishments while others have high vacancies.
The timing of the sale isn’t ideal. Buyers are no doubt looking to pick up bargains, given high interest rates, capital constraints and a stuttering economy, which have placed pressure on property returns.
But as Rebosis CEO Otis Tshabalala says, it’s a sealed-bid process: “So offers are unlikely to be too cheeky.”
The portfolio, consisting of 35 office buildings, five shopping centres and one industrial building, is not in good condition due to lack of cash for maintenance and refurbishments
Registered buyers include a mix of listed real estate investment trusts (Reits), institutional investors and pension funds, smaller private companies and entrepreneurs.
Tshabalala expects strong interest in the government-tenanted office buildings from smaller, unlisted players.
The two flagship regional shopping centres, Baywest Mall (88,620m²) in Gqeberha, valued at R1.6bn, and Hemingways Mall (73,829m²) in East London, valued at R1 .72bn, will likely elicit bids from larger Reits.
Andrew Brooking, founding director of Java Capital, concedes it’s a “tough time” to sell commercial real estate. Still, he says the sale presents a rare opportunity for savvy players with strong balance sheets to have a tilt at assets that rarely come on the market.
“The portfolio offers plenty of value-unlock potential in the right hands,” he says.
So what led to Rebosis’s demise, one of the JSE’s best-performing property stocks in its early years?
The company, which was founded by lawyer-turned-developer Sisa Ngebulana, seemingly bit off more than it could chew. Within four years of listing, its portfolio had ballooned from seven properties worth R3.3bn to more than 30 worth R10bn.
Cash flow problems were triggered by an ill-fated foray into the UK in 2015, shortly before Britain decided to leave the EU. The Brexit vote precipitated a 30% writedown in the value of Rebosis’s UK retail centres, which translated into a R2bn impairment.
Debt issues were compounded by the acquisition of property developer Billion in 2016 for R4.9bn.
By late 2018, investors started bailing in droves. In the year to December 2019, B shares crashed from 740c to less than 40c, wiping off more than R6bn in the company’s market cap.
When Rebosis was suspended in August, B shares were worth only 16c while the loan-to-value had spiked to nearly 73%.
The conclusion of the sales process is expected to take about seven months. Ultimately the creditors, of which Nedbank is the largest, will decide which offers — if any — are reasonable.
Rebosis is most likely to be wound up on conclusion of the process, depending on the number of properties sold and how much money is raised.
Meanwhile, long-suffering shareholders shouldn’t hold their breaths. They are last in line in the business rescue process and likely to recoup little — if anything — given the quantum of debt owed to secured creditors.
Ngebulana, still the biggest single investor with 29% of the A shares and 16% of the B shares, will take a pounding. So too will Zunaid Moti, who is behind major shareholder Citax Investments SA.
The Public Investment Corp and Sanlam Investment Managers count among the largest institutional investors.
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