JSE-listed real estate investment trust (Reit) Rebosis Property’s distributable income decreased by 61% year-on-year to R195-million for the six months ended February 28.
Of this, R96-million was as a direct result of the Reit’s exposure to New Frontier Properties, it said on Tuesday.
The value of its direct investment in New Frontier Properties and the loan to the black economic empowerment consortium had been written down to the underlying net asset value.
An impairment of New Frontier Properties of just over R1.9-billion, together with the valuation adjustments, resulted in Rebosis’ loan-to-value (LTV) increasing from 51.6% as at August 31, 2018, to 57.1% by end-February.
Further, a difficult trading environment, coupled with uncertainty surrounding Brexit and the recently concluded national and provincial elections in South Africa, resulted in Rebosis’ finance costs for the period under review increasing by R97-million as a result of lower income from cross currency swaps, higher average debt levels and higher borrowing costs.
The loss of rental warranty income of R42-million and rate rebates of R24-million further reduced the company’s distributable income.
As a result, the Rebosis board agreed to deleverage the fund and has resolved to not declare an interim dividend. Rather, the board intends to distribute a full-year dividend at the final distribution date, which will be after the financial year-end on August 31.
In terms of funding, Rebosis’ borrowings decreased to R10.1-billion from R10.8-billion as at August 31, 2018, owing to the use of proceeds from the Boxwood disposal, which was partially offset by the distribution payment.
The weighted average cost of debt for the six-month period increased from 9.3% to 9.5%, largely owing to the increase in the prime rate, as well as the refinancing of some of
the three-month Johannesburg Interbank Average Rate facilities to prime facilities.
There are currently hedge arrangements in place for 83.9% of the debt, the company highlighted.
Although trading conditions are expected to remain challenging for the remainder of the financial year, Rebosis plans to continue focusing on renewing its remaining office leases.
The company’s office portfolio delivered a 5.3% net property income growth in the reporting period. Filling up the remaining vacancies at Forest Hill will continue to be an area of importance to Rebosis, the company said.
However, the company noted that its main focus would be on the successful completion of previously announced disposals and the disposal of the second tranche of its retail portfolio.
In turn, this will also serve to reduce the LTV to below 40%.
The company incurred high levels of financing costs as a result of the high debt levels during the reporting period. This is expected to reduce significantly following the reduction in the expected LTV level and should have a positive impact on the company’s earnings.