With rising interest rates and higher food and fuel costs expected to constrain consumer spending, Rebosis Property Fund says it is relooking tenant mixes within its retail centres to remain relevant.
Despite the easing in trading restrictions and shoppers returning to malls, its Forest Hill City shopping centre in Tshwane is battling high vacancies.
For the six-month period ending February, Forest Hill’s vacancy rate was 26%, or more than 19,000m2 of vacant retail space. Group sales turnover achieved per rentable square metre was up 7.4% from 7.2% during the same period in 2021.
“Forest Hill is a challenge and we are working with a retail specialist on a turnaround strategy to reduce vacancies and increase revenue,” CEO Otis Tshabalala told Business Day.
The regional mall, measuring more than 70,000m2 in size, opened in 2014 and is anchored by Pick n’ Pay, Checkers Hyper, Woolworths and Clicks.
Rebosis is a JSE-listed real estate investment trust (Reit) which owns retail, offices and industrial assets valued at R13bn. Its five shopping centres — Baywest Mall and Hemingways in the Eastern Cape, and Forest Hill, Sunnypark and Bloed Street in Gauteng — are valued at R5.9bn.
It also owns 35 office properties valued at R7bn, let primarily to the national department of public works, and a single-tenanted industrial building valued at R108m.
Rebosis’s office portfolio reported vacancies of 24.01% while total group vacancies were 20% excluding office properties earmarked for conversion to student accommodation.
The company, which is struggling financially, is banking on the disposal of its office properties to reduce debt. However, the disposal has been revised to R3.3bn from R6.3bn in August 2021 due to the reduction in the sale portfolio through the removal of 11 rental enterprises from the 32 original earmarked for disposals.
Tshabalala said the deadline to finalise the transaction has been extended to June 22. The reason for the reduction in disposal properties is that Vunani Capital Partners wanted five-year leases and most of the buildings have three-year lease terms.
Rebosis will look at selling some of the office assets that were initially part of this transaction once the deal has been completed.
He said the revised R3.3bn disposal will create much needed liquidity which will help the company reduce its loan to value ratio (LTV), which is at 72% from 71.4% in August 2021. The initially forecast R6.3bn would have reduced the company’s LTV ratio to 42%.
“We will continue to prioritise negotiations with our funding providers on the renewal of expired and near-term debt facilities to bolster our liquidity in the rising interest rate environment.”
Tshabalala said that during the reporting period more than 95,000m2 of lease renewals were concluded across the retail and office portfolios, with notable leases at Hemingway Mall and the department of public works. Government lease agreements are between three to five years. New leases of nearly 10,000m2 were signed during the period.
Lower finance costs of R358m, from R516m in 2021, mainly driven by a lower repo rate, resulted in distributable income before tax bouncing back to R72.5m from a R71.3m loss in the same period last year.
Rebosis’s portfolio was valued at R13bn from R13.1bn in 2021, translating to a R156m drop in property values, with the retail portfolio recording R134m devaluation.
“We will continue to prioritise negotiations with our funding providers on the renewal of expired and near-term debt facilities to bolster our liquidity in the rising interest rate environment.
“We will continue to focus on portfolio optimisation and with various leasing initiatives in place we are confident of reducing vacancies across our portfolios,” said Tshabalala.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.