Rebosis recently made news with its announcement of a three-way merger with Delta Property Fund to buy into Ascension Properties. The details of the acquisition have since changed, with Delta no longer being part of the deal. The real estate investment trust (REIT) with a market cap jus under a R4.4bn is headed by Sisa Ngebulana and is a favourite among boutique investors. In this piece Ngebulana explains the unexpected change in the merger structure, why it is nothing to be concerned about and where the company expects to go in the future. The REIT has a PE ratio 9.28 and a dividend yield of 8.46% with a growth plan that includes substantial focus on burgeoning with the African story of economic gain. If Sisa’s enthusiasm is anything to go by, then it is certainly a company to watch. – LF
ALEC HOGG: Delta Property Fund has withdrawn its bid and is selling its entire holding of Ascension Properties to Rebosis Property Fund. Sisa Ngebulana, who’s the Chief Executive of Rebosis Property Fund, is with us in the studio. It was hoped to have been a three-way merger. Now it looks maybe two-way. What went on? You said you did due diligence. You looked under each other’s skirts. You didn’t all like what you saw there and the one’s gone off in its own direction.
SISA NGEBULANA: Let me start with the last part you mentioned there, Alec. We did due diligence. For all intents, we hoped that the merger would go ahead. We were satisfied with the due diligence. I think the guys at Delta run a good show. They run a good business. However, I think that just from a timing perspective… They have many other priorities. They’re busy listing Delta International. They have a lot going on at the same time, which makes due diligence a little more difficult as well generally, when you have a lot of activity going on at the same time. Due diligence just carried on and on because it’s just a whole lot of new activities happening at the same time, so we all came to the conclusion that it probably is not the right time to do this now, so let’s shelve it for another time. However, let’s resolve the Ascension matter and I think the solution is really a very elegant solution, and I think it shows the maturity at which the respective teams have approached this.
ALEC HOGG: Was there any emotion involved? You want to do it. You’re getting the guys together, and there’s frustration sometimes that builds when you cannot progress it.
SISA NGEBULANA: Yes, naturally. As with any other due diligence process, you question each other on the approach and everything else, so it’s not comfortable. However, I think that overall, we were quite comfortable with what we saw. Unfortunately, timing just didn’t work for either of us and hence, we said ‘let’s resolve Ascension because Ascension has really just been something else that’s been hanging’. The market perception started getting out there as if we’re doing this thing because of the Ascension crisis.
ALEC HOGG: Just explain what’s going on at Ascension.
SISA NGEBULANA: As you know, in January we took over the management company. We’ve since incorporated a lot of the asset managers who used to be Ascension asset managers, into our asset management business. We’ve been running that business. It’s actually an excellent business. It’s better than we thought. We had done due diligence for two months in November and December last year on that business, and with that being satisfactory to us; we then proceeded to acquire the asset management business. Then there was the whole thing about the negotiation that they were also doing with Delta. I think that’s all history now, we’ve seen a very good business, and we’ve been running that business quite nicely. Ascension is in line to meet their focus and I think we’ve introduced a lot of good efficiencies, together with their team. They really had a good team that’s really fully settled in with our team, and we’ve driven a lot of efficiencies through that business. It really is in good hands.
ALEC HOGG: It’s interesting to see the price that you’ve decided on – R4.76. It’s quite ‘toppy’ if you look back over the last three years. It hasn’t been much higher than R4.80 (this is for the A-shares). The B-shares are at R2.61. How did you come to that price? Altogether, its recorded at R350m that you’re paying.
SISA NGEBULANA: Yes, that’s the Delta…
ALEC HOGG: The Delta stake in Ascension.
SISA NGEBULANA: We agreed that we’d take a 30-day view, so it’s a fair market…
ALEC HOGG: So it’s simple. That’s what the market price was. What happens from here?
SISA NGEBULANA: We always had the intention to proceed with a scheme of arrangement around…
ALEC HOGG: A wholly owned Ascension…
SISA NGEBULANA: So that Ascension can be incorporated into the business of Rebosis, it will create something north of R10bn in terms of assets, and something around R6.5bn in terms of market cap, so it still is our intention. At the moment, we’re happy with the status quo. We will now, effectively own about 32 percent of that business. We run that business. We manage that business. It’s a very good business and our Board will then assess the options on how it develops.
ALEC HOGG: Delta’s off on one side. They’re going to go and do their own thing. I was at a Boutique Management Conference earlier this month. Charles Booth used to be the Chief Investment Officer of RMB Asset Management and then he went off and joined Truffle when they started Truffle. I asked them all to give me one share that they liked and he likes Rebosis.
SISA NGEBULANA: Oh, really?
ALEC HOGG: Yes, which is a good compliment.
SISA NGEBULANA: That’s fantastic.
ALEC HOGG: Are you going to make him happy in the next year?
SISA NGEBULANA: We’ve always said this from the day we listed, that we actually have a very nice suite of assets. Having seen and having managed the Ascension assets – fitting into our mould – they really fit our mould quite nicely and we’ve seen them deliver. If you look at the Rebosis business case and the underlying fundamentals in our business, it’s really good assets with great retail that is still at the early stage of its development, and a huge upside with double-digit growth. I think it all bodes well for going forward. Last month, the retails sales came at one-point-eight percent. We’re still seeing double-digit growth in our portfolio.
ALEC HOGG: But you’re well focused and you have Ascension to put into the pie, as well. Sisa, thanks very much for coming through to the studio today. That was Sisa Ngebulana, and there you have the whole inside story about the three-way merger, which is now not going to be a three-way merger anymore. He’s the CEO of Rebosis.
