Rebosis expects more retail casualties


Rebosis expects more retail casualties

Published Date: 2020-06-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

Rebosis expects more retail casualties

The property fund says some tenants in the food, beverages and entertainment sectors may not recover from Covid-19.

Rebosis Property Fund has slashed the value of its property portfolio by R1.7 billion as conditions get tougher, particularly in the retail sector. However, it says its more defensive office portfolio will help mitigate some of the risk.

The real estate investment trust (REIT) has a portfolio invested in commercial and retail properties. Its commercial assets benefit from a sovereign underpin from leases to national government departments across 36 buildings while its retail portfolio includes Baywest Mall in Port Elizabeth, Hemingways Mall in East London and three regional malls in Pretoria. It wrote down the value of its commercial property by 7% to R7.2 billion and its retail portfolio by 21% to R6.2 billion

Property income declined by 5.3% to R933 million over the six months to end-February after it disposed of some properties while property expenses increased by 7.1% to R302 million due to additional estimated credit loss allowances. Total distributable earnings for the period fell 89% to R22 million. Distributable income for its A units fell 74% to 34.46, while income for its B units declined to zero from 16c previously. Like last year, it hasn't declared an interim dividend.

Rebosis said the lack of economic growth, now exacerbated by Covid-19, would continue to negatively affect the retail environment, putting a squeeze on landlords. It collected 73% of April's rentals, 78% for May and 88% for June, with higher collection rates expected in the months ahead. However, it said some tenants in the food, beverages, services and entertainment sectors may not recover for the impact of the lockdown and it would provide sensible rent concessions to help small businesses.

The group said interest rate cuts this year would help lower finance costs due to its high debt levels, which it plans to reduce through asset disposals. Over the period, borrowings decreased to R9.7 billion from R10.1 billion as it used the proceeds from the disposal of Mdantsane shopping centre to reduce its gearing. It said it was also assessing various approaches from the market. A second attempt at a merger with Delta Property Fund was called off in March after the two funds couldn't reach an agreement on the terms.

The fund's shares fell 13% to 39c yesterday.

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