In an effort to improve its credibility, Rebosis Property Fund has agreed to have its portfolio revalued after its auditor BDO granted a qualified opinion on its results for the year to August because of a valuation discrepancy.
BDO, which issued the opinion report in December, a month after Rebosis issued its full-year results to August, originally appointed Quadrant Properties to value the portfolio. Quadrant head Peter Parfitt valued the portfolio at R12.8bn, lower than Rebosis’s R15.6bn.
But Rebosis’s valuers disagreed with Parfitt whose valuation excludes the R500m sale of Mdantsane mall. The group used private valuer Dipeo Valuations for its retail portfolio and DNA, another valuer, for its office portfolio.
Evan Robins, a portfolio manager at Old Mutual Investment Group, said he had never seen a listed property company receive a qualified opinion before in his career of more than 20 years. A qualified opinion could make investors more cautious about investing in the company.
Rebosis, the owner of malls and offices, has agreed to appoint another valuer to see if the valuation compares favourably with those of Dipeo and DNA or that of Quadrant.
Rebosis said it would continue to provide the market with clarity on the valuation discrepancy and that it had initiated discussions with its auditors “to appoint a mutually acceptable independent valuer to perform comprehensive independent valuations on all investment properties”.
“The intention is to commence this process urgently,” it said.
It would disclose the results of the valuations after the February 29 financial close and before the release of its interim financial results.
Rebosis’s management is trying to turn the ailing group’s fortunes around after a failed investment in the UK caused its debt levels to skyrocket to R9.5bn.
The group is restructuring its balance sheet through selling assets in hopes of bringing down its relative debt level or loan-to-value from 64.5% to below 40%.
Fund managers prefer property companies’ loan-to-value to sit between 30% and 40%, especially in weak economic environments where financial shocks can make it difficult for the companies to service debt.
Last year it sold its investment in UK mall owner New Frontier Properties for just R700, taking a hefty loss after the company had invested a total of R2bn in 2015 in exchange for 67.5% stake.
CEO Sisa Ngebulana said New Frontier’s assets had suffered huge devaluations amid uncertainty around the Brexit process.
Rebosis was still paying interest on the debt it used to fund the acquisition of New Frontier even though the asset was no longer on its balance sheet.
Ngebulana said on Monday in an interview with Business Day that when Rebosis invested in New Frontier there were no signs of Brexit occurring. However, after the 2016 referendum in which the UK voted to leave the EU, commercial property valuations had fallen off a cliff and there were no clear signs as to when they would bottom out. As a result, the investment was sold for next to nothing.
Ngebulana said Rebosis’s SA assets were performing well and that its malls and assets were still coveted in the sector.
He said the company could be turned around and management was considering options for how to achieve this. Rebosis announced in August last year that it had been in talks with Delta Property Fund about a merger. The talks are continuing and a circular will be released if the two agree on a merger.
Ngebulana said Rebosis had received interest from investors about taking the fund private.
Rebosis’s B-share price lost 88% in 2019 but it has recovered 34% so far in 2020.
The company has a dual share A-B structure which is designed to serve investors of varying risk appetites. A-linked shareholders are paid first. The dividend they receive is set such that their dividend growth is capped at 5%. B-linked shareholders are paid whatever is left over and there is no limit on the potential growth of their dividends.
• Republishes to correct the following errors in the January 20th article titled, Rebosis to appoint independent valuer:
- Rebosis property portfolio is valued at R15.6bn not R15.9bn as we have erroneously reported.
- Adds context to that Quadrant valuation of the property excludes the R500m sale of Mdantsane mall
- Removes reference to the timing to the release of the merger circular in paragraph 16.
- Adds the total amount Rebosis invested in the UK's New Frontier in paragraph 14.
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