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‘The intention of the business rescue process is to rectify the loan-to-values as far as possible. It’s very important to sell properties at the best value possible, to reduce [the group’s] debt levels,’ says Jacques du Toit, one of the joint BRPs of Rebosis Property Fund.
Rebosis Property Fund, the first major black-owned real estate investment trust [REIT] to list on the JSE over a decade ago, is in business rescue.
It was founded by property entrepreneur Sisa Ngebulana. However, Ngebulana is no longer involved at the executive level, or as a major shareholder.
The group’s financial troubles partly go back to Brexit, after a failed venture in the UK, which saw its UK properties being written down quite significantly and sold for almost nothing. Its debt or loan-to-value [LTV] ratio was already one of the highest in the sector when Covid hit, and it seems that the Covid-19 pandemic broke the camel’s back.
On the latest episode of The Property Pod, we are speaking to Jacques du Toit of DTB Business Rescue, one of the joint business rescue practitioners [BRPs] of Rebosis Property Fund. DTB Business Rescue is working with Genesis Corporate Solutions on the Reit’s business rescue plan. We had hoped to also get Rebosis’s current CEO Otis Tshabalala on the pod, but unfortunately, he couldn’t make it.
The company was already in financial difficulties prior to Covid. With the latest development around asset sales, there seems to have been little option for the firm other than to go into business rescue?
“Yes … what transpired was that with Covid, we all know that the retail sector was under a lot of pressure in terms of rentals. Also, square [meterage] prices were reduced to keep tenants, and escalations were under pressure. Similarly, the commercial, governmental buildings, where the government departments then went back to a more market-related price in terms of square [meterage] on the buildings, and that put huge pressure on the loan-to-values of Rebosis and its subsidiaries.”
“As we all know, it’s a JSE company, so that was under pressure the whole time. So the loan-to-values are currently under pressure and in terms of the business rescue plan, we have to then have a plan on board which is then also conciliable to the creditors.”
“The intention of the business rescue is to see that we can rectify the loan-to-values as far as possible. It’s very important to sell properties at the best value possible to reduce debt levels, so it is the intention to reach high [price levels] through the public participation process and sales process, and then for Rebosis to remain with properties, to actually continue as a business and also continue as a listed entity.
“So the intention is to see if we can rectify the loan-to-value and then see if they can exist going forward. That is the intention.”
There have been some delays in getting the business rescue plan out or approved, but I’m sure you are happy that all the creditors supported the plan in March?
“Yes. The delay was caused by us having to familiarise ourselves with all the detail of the properties. Now, if you see, we had to what we call ‘pull apart’ the facts of each and every property in terms of income [and] expense … to arrange for Deloitte, our financial advisors, to give credibility to our figures, and also credibility to our business rescue plan in the cash flows going forward, as well as values. And also, then to give a plan that’s workable.”
“So, it took time to actually dissect all these properties, dissect values, dissect income and possibilities in terms of vacancies and filling of vacancies, or repurpose of properties. So the delay [was] caused to create credibility and to put facts on the table that can be understood, and that are also credible.”
Image By: Rebosis Property Fund
Are you in a position to tell us who some of the biggest creditors are?
At this moment in time, it’s between Nedbank and Investec, but Nedbank is the biggest creditor with Investec, and then there are a few other financial institutions involved as well.
So, effectively at the moment, is Rebosis controlled by its funders?
“No. In terms of the business rescue plan, we have to implement the plan, so it’s not controlled by the funders. We have to interact with the funder and the lender, of course, in terms of the [Companies] Act, especially in regard to properties and the sale of properties, the release figures and so forth. So we work [hand] in hand with the lenders, but at this moment [the] controlling hand is the business rescue practitioners …”
“What we’ve embarked on is, of course, a public sales process; [it is] very important to comply with the rules and regulations listed by the JSE.”
“Furthermore, [to see to] all public participation and not to exclude any participants for the benefit of the creditors, of course, and the benefit of the stakeholders as well. So what we’ve embarked on is a public sales process, and we have extended the public sales process. Actually, the closing date is [May 12, 2023] for registration purposes.”
Letters of interest
“Then we embark on a process of letters of interest. That will be by Monday [14 May 2023], when the letters of interest will be filed. And then we’ll go through to the process of the due diligence and offers to purchase.”
“During this whole time, we will engage with the lenders in terms of adjudicating those letters of interest and also offers. That will be on a communication basis. That’s the process that we’re going to follow. Everyone needs to have the opportunity to partake.”
“Within the next few weeks, we will have more indication of the interest, the quality of the interest.”
“And then also within the six-week period thereafter, we’ll be getting to an offer-to-purchase stage. So we pre-empted, in terms of the business rescue plan, to complete the process within 12 months, but within the next month or two, we’ll definitely have more clarity in terms of interest in the way that the sales process will play out.”
Can you highlight the group’s major or flagship assets and number of assets at the moment?
“There are 41 properties, a mix of commercial properties and then the retail centres.”
“Now the retail centres are the five centres, of which the biggest is, of course, Baywest Mall in Port Elizabeth or Gqeberha. And then Hemingways [Mall] in East London. We have Sunnypark and Bloed Street malls in Pretoria, and then also in Centurion we’ve got Forest Hills.
“So there are five major centres involved. The rest are mostly governmental properties, the rental properties on a commercial basis.”
Image By: Rebosis Property Fund
How confident are you that most of the properties earmarked for sale will sell? I’m sure there’s interest both from the listed and unlisted property space.
“Yes, of course, no one can be sure what the end result will be, but we have a lot of interest in the retail and also in the government space or the commercial space. So it’s a variation of interest between listed entities, smaller companies, companies in the space of the commercial and the government rental space.”
“We’ve got various interested parties which are credible parties currently looking at it, and also coming before business rescue. We’ve also carried those along in terms of the system.”
“So the interest that we have is credible at this time. We will see what the letters of interest show and then take it from there.”
“The intention is actually to sell off the retail [centres], and to go back to the original interest in the government space.”
“So if it is in the remaining properties, it will be on the commercial side – and I think that’s quite important …
“The intention is to keep at least viable and proper properties as the portfolio we remain with. That all depends on the purchase price. Our hope is to get good prices and to get the debt levels reduced, [and] to remain with [some] properties.”
“Otherwise, of course, if we can’t achieve those debt levels, by all means everything will be sold at the end of the day. But we hope and we trust that we can achieve good prices in the market, even in the difficult situation in the market.”
“We hope that the financial institutions will assist in terms of using the balance sheets of the different purchasers, in terms of maybe obtaining some aggressive finance under the circumstances. So if you look at the lenders currently, [what] is very important is that everyone is assisting and everyone wants to help, and everyone wants to see this business rescue succeed.”
“So, we have a lot of support from the lenders, and that’s good news under the current circumstances with proposed purchases going forward.”
