How Sisa Ngebulana Built SA's First Black-Managed Listed Property Fund
When Sisa Ngebulana left Mthatha to pursue his dreams he had high aspirations for himself. He didn't know what path his career would take, but he did know he wanted to achieve greatness. When he listed Rebosis Property Fund in 2011, it was the first black-managed and substantially held property fund to be listed on the JSE. He is also the founder and CEO of Billion Group, a commercial and retail property developer that will spend in excess of R35 billion over the next ten years on its current projects.
- Player: Sisa Ngebulana
- Company: Rebosis Property Fund (listed in 2011)
- Rebosis Consolidated group assets: R23 billion
- Awards: The Entrepreneur of the Year Award (2006 — SA), Property Developer of the Year Award (2009 — SA), Pioneer Award (2014 — SA), African Business Excellence Award (2014 — UK House of Lords) and Global Leadership Excellence Award (2016 — Global Leadership Congress).
- Visit: www.rebosis.co.za
From adversity comes success. Remember that. When you are faced with insurmountable challenges, know that you are being honed for something great. Use the lessons and the pain and build something stronger than you were, smarter, more able to withstand further hardships.
This is a mantra Sisa Ngebulana lives by. It’s also a path he has walked numerous times. His first business caused him so much stress that to this day he believes it almost cost him his life. Yet he pushed on.
He has faced ruthless competitors, paid back millions in debt, weathered bad press, survived industry collusions attempting to freeze him out and halt his projects, and still, he has pushed on. Because he believes that this is the path of a true entrepreneur.
The higher the risk, the higher the rewards, and Sisa has always kept his eye on the rewards, no matter what life has thrown at him.
“Entrepreneurship is a risk; things don’t always go your way,” he says, “but when (not if) they don’t, use it and learn from it. What went wrong? What could I do better? Take these lessons as a strength and move forward.”
Lesson One: Even good businesses go bad
“My grandmother made us strong,” he says with pride. Born and raised in Mthatha by his grandparents after his father passed away in a trucking accident, Sisa was taught at an early age that while there is no guarantee of success, if you foster good habits and are disciplined, driven, self-reliant and able to take accountability for your actions and decisions, you have a much higher chance of achieving your goals.
“At any given time there were between 12 and 15 of us in the house, cousins, brothers and sisters, and we were all always working. Every day, my grandmother woke us up early and instructed us to find something to do. ‘You have two hands and two eyes,’ she’d say. ‘You’re blessed. Now go and use them.’ She gave us the tools to make something of ourselves, but it was up to us to use them.”
It was this sense of accountability and personal responsibility that directed Sisa’s actions when his first business, a trucking and transport company, failed. “I built the business up quickly while I was doing my articles at a law firm in Cape Town,” he says.
“By the time I completed my articles I had nine trucks and decided to pursue business full time.”
The early successes did not continue though. Sisa struggled with bad debtors, and could not pay his creditors or the truck instalments to the bank. His health started deteriorating. “I blacked out three times in a matter of weeks. The first time the doctors thought it might be kidney stones.
“The second time they decided the problem was my appendix, and scheduled an appendectomy. I was still recovering from the operation when I had my third blackout. It was at that point that my aunt, who is a doctor, told me that my problem was stress. It was clear: It was the business or me. I had to make a choice.”
Sisa chose his health. He still owed the bank R800 000, and he knew he needed to auction off his trucks and get a job to start repaying the loan. “The bank didn’t want me to auction off the trucks — they wanted surety for the loan. Without the assets they just had my word that I would pay them back.”
A skilled — and persistent — negotiator, Sisa convinced the bank to give him 36 months to repay the loan, and to let him auction off the vehicles to make the first instalments.
“I repaid the loan in 32 months. I didn’t declare bankruptcy and I didn’t walk away. The consequences of this business were mine. If you default on a loan you can carry on with your life, but you cannot get credit with a bank, and you cannot be the director of a company.
“Many people choose that path. It wasn’t going to be mine. There were too many things I wanted to achieve. I needed to do it right, deal with the challenges and get through them. Throwing in the towel would have prevented that. There will always be things outside of your control, but you need to own up to all the consequences of your actions — good or bad.”
This wouldn’t be the last time Sisa would face this decision. If anything, his next failed enterprise would make the trucking business and its problems pale in comparison.
Finding his feet and starting again
When Sisa went off to university, he was one of five grandchildren heading off that year. His grandmother had saved enough to pay for one year for each of them. Thereafter it would be up to them to achieve good enough marks to secure bursaries or loans. Sisa took her sacrifice to heart.
For the first time he was old — and mature — enough to understand what his grandparents had done in supporting him and his four brothers and sisters, and giving them every opportunity they could. His school marks had been average. His university marks were not.
He worked harder than he had in his life, and graduated with top marks, enabling him to do his honours degree and take his pick of top law firms through which to complete his articles. He then simultaneously studied accounting and economics through correspondence at UCT, after realising that most of his peers had legal and financial degrees. He was interested in finance and upskilling himself.
Those skills and degrees became important after his trucking business went under. “There was no shortage of job offers,” he says. “But I needed something that paid my bills, enabled me to pay back my debt to the bank, but also furthered my career.”
That opportunity lay with Eskom’s legal department (specialising in finance). This further enabled him to complete his master’s degree at RAU. “Even though entrepreneurship was in my blood, I spent seven years at Eskom, and it proved to be invaluable experience that carries me to this day. I needed those foundations.
“Over the years, I have seen many entrepreneurs limited by their experiences — the ability to take their business to the next level eludes them. At Eskom I learnt governance, delegation, HR, industrial relations, management and more importantly, treasury (having traded money and capital markets) — not just how to be a founder and owner, but how to successfully manage a large organisation.”
While the experience was instrumental in future successes, the salary was not enough to cover his debts, and so — with Eskom’s blessing — Sisa started investing in property. “I was upfront with Eskom about my debt from the beginning.
“My plan was to purchase land, build houses and flip the properties. Since I could have a building team doing the work with check-ins on weekends, my managers allowed it.” Sisa had experience in this area, as he’d started renovating and selling properties while he was at varsity.
His first land parcel — in Kyalami Estate — cost R22 000. Because he couldn’t qualify for a loan with his outstanding debt, he found a colleague who was interested in a business partnership, and with a R350 000 bond they built and flipped the property for a profit within six months.
Sisa used his profits to buy the next property and slowly, one plot after the next, he developed the whole street. He paid off the bank loan and began developing high-end clusters. His ‘side’ business was booming, and even though he was still employed by Eskom, he had now amassed some personal wealth.
It was at this point that a listed coal mining company approached Sisa to help them save the business. Their largest subsidiary company was defaulting on its debts, and the entire group was in financial trouble as a result.
“I restructured their balance sheet and got new funding from the banks,” says Sisa. But these measures weren’t enough. The company was involved in anthracite coal mining, and international prices declined so severely that the business was unsustainable.
Once again, Sisa restructured the balance sheet and approached banks for finance, outlining his recapitalisation programme. By now he was so involved in the company’s journey that he had invested his own personal funds in it.
“The banks were clear that they would not give a cent unless I was involved. I’d invested everything I had into the business. I needed to make it work, and I felt assured that if I resigned from Eskom and took on the challenge, the banks would come to the party.”
They didn’t. Three months after leaving Eskom and bonding his house, plots and remaining properties to keep the business afloat until the banks came on board, Sisa realised he needed to cut his losses. He had personally signed surety for the company’s loans, not to mention his personal debts that were tied up in the business.
“I had to face the fact that I’d lost the gamble. The risk hadn’t paid off. Holding on to the business would have just sunk us into even more debt. Admitting defeat was painful — real physical pain — and caused immense stress. But I’d learnt to recognise that stress, and the toll it takes on the mind and body, and I think I handled it better.
“In times like this, there’s no point looking back with regret. I could have stayed employed. I was making good money developing clusters on the side. It was safe and comfortable. And now it was all gone. I couldn’t even pay my kids’ school fees, and needed to ask the school for a five-month fee hiatus. But I needed to look forward. Regrets serve no purpose. Learn from the experience; that’s all you can do.”
Sisa now needed to find a way to settle the company’s debts. “Luckily we had some highly specialised low-seam mining machines that we could sell. India and Brazil have similar coal seams, and so I spent six months travelling back and forth until I sold the equipment for R200 million. I then negotiated terms for the remaining R30 million that we owed.”
Once again Sisa was in a position where he needed to find a way to personally pay back debt, except this time it wasn’t R800 000, but R30 million. Employment wasn’t an option — it would never be adequate to pay back that much money. Instead, he returned to his core: Property.
Dealing with R30 million debt
“I was lucky enough to have options on some land in areas like Hyde Park and Bryanston. I sold four units in Hyde Park off plan, and was able to hustle an overdraft based on those pre-sales. From there I completed 21 clusters in Hyde Park followed by spec developments in Dainfern, Pecan Ridge and other high-end estates.”
Sisa was putting into action a lesson he had learnt while watching his grandparents growing up — success is cyclical. You can be abundant one minute, and have nothing the next, but if you keep moving forward, you can build that abundance again. You just need to get started and then build on each small success.
“The coal mining business was a financial blow, but it was also a blessing in disguise. It forced me out of employment. If it hadn’t, I might still be employed today, and I would never have achieved what I have through the Billion Group and Rebosis.”
Throughout his career, Sisa has consistently pushed himself out of his comfort zones. Residential development was going well, but he was up for the next challenge, and so he set his sights on commercial properties. “You can’t let the fear of failure hold you back,” he says. “You also can’t let a lack of experience stop you trying new things and taking on new challenges.”
That challenge would take the form of an old commercial property in Pretoria that Liberty was selling. “Corporates were making the move from the old commercial CBD hubs to decentralised locations like Sandton, and they left some really nice buildings behind that could be picked up for nothing.
“The problem was that they carried a lot of risk. For example, Liberty’s building was selling for R60 million, but the bottom two floors in the basement were flooded, and all-in there was R120 million worth of work that needed to be done.
“In addition, I needed to start refurbishing floors before the deal went through so that I could attract tenants to the building, as I couldn’t have it sitting idle after Liberty moved out. I’d spent R4 million by the time the deal went through.”
But getting the deal wasn’t easy. Sisa approached RMB five times to finance it, and each time they said no. “The reason for the ‘no’ changed each time I went back to them. To be honest, I don’t know why I kept going back, but I was determined to make it happen.”
On the sixth attempt, Sisa was told that unless he had R10 million to put up as collateral, they didn’t want to hear from him again.
“My response was that this was fantastic. They couldn’t understand my excitement. It was still technically a no. But I saw it as a yes; I understood what I needed to do now — I had a goalpost that I could work with, and would eventually do a deal with the bank.”
All-in the Liberty building cost R85 million to develop: R40 million to purchase the property, and R45 million for the construction. Contractors quoted Sisa R120 million to refurbish the building, and he used that to negotiate Liberty down from R60 million to R40 million.
However, the agreement with RMB was for R60 million, of which they would put up R30 million. “I jostled together the rest, did the construction myself to keep costs down, which was why I was able to do the job for R45 million instead of R120 million, and I had my first commercial building.”
It was a 26-story building, and Sisa secured tenants up to the 18th floor and was then able to refinance the building. “Within 18 months it was valued at R180 million.” And just like that, Billion Group was in the commercial property sector, building and refurbishing properties in the Johannesburg and Pretoria CBDs.
The case for Regional Malls: Finding a new challenge
The interesting thing about success is that it’s actually quite boring, and Sisa soon realised that he loves a challenge. “The thing about properties, whether they’re residential or commercial, is that once you’ve sold the property or have a tenant in, you’ve done it. Money goes into the bank and there’s nothing really left to do.
“I wanted something in the property space that was a real challenge.” That something was regional shopping centres. “The risks were high, assessing and mitigating them is scientific. You need to do your homework properly, but the idea of sinking my teeth into that space was incredibly exciting.”
Even so, Sisa did not yet fully appreciate that a project of that scale can produce challenges from places you never expect them, and these can destabilise both you and the project.
“My first regional mall was Mdantsane City in the Eastern Cape. From the moment I secured the contract the challenges began. First, I couldn’t find a contractor that wasn’t R20 million over my budget. It was my first real introduction to the reality that collusion does exist. I gave the earthworks contract to a separate company and began blasting the site while I continued to look for a building contractor.
“The site was almost solid rock, and needed 84 blasts to prepare for construction. Each blast is carefully planned, and signed off by the SAPS and bomb unit. On the 75th blast, someone died.
A local mental hospital had been evacuated as per blasting standards, but one patient had returned to her bed without anyone realising. During the blast, a rock flew out in an unexpected direction, and went through the hospital’s roof, through the ceiling and hit the patient on the head.
“It was a freak accident, and the earthworks company was cleared of any wrongdoing — they had followed protocols to the letter — but there was a deep emotional impact. Someone had died. I shut down the site while we processed and came to terms with what had happened.
“Then, two months later, some kids cut through the fence to play on soil heaps that were being moved by the earthworks machines, and a child was buried alive. This time I shut the site down for six months.
“I questioned everything: What I was doing, why I was doing it, my emotional state and our purpose. I was brought up in a devote Christian home, and my faith has always been a great source of strength to me. We had prayers over the site with pastors and churches.
“Eventually, we reopened. We had loans that needed to be paid, and the only way to do that was to build an operational regional mall that could generate income. And so we went back to work. By this stage we had fallen behind and needed to make up lost time.
“Retailers charge developers heavy penalties if malls don’t open on time. They need to order stock and hire employees, and so every day that a mall doesn’t open costs them money — which they pass on to the developer.
“I had found a contractor in Mthatha, but I realised his pace was too slow — there was no way we would finish on time at his current pace.” Even though he and his team had no experience in projects of this size, Sisa took over the construction of the project and managed to complete it on time.
While he was finishing Mdantsane, Sisa was already bidding on another parcel of land, this time in East London.
“The site was perfect; it belonged to Tsogo Sun, which had a casino on the property, but was looking to sell a section to develop a mall.” When Sisa first bid on the property, it was R15 million; soon other bidders entered the fray, pushing the price up to R45 million.
Although Billion Group would ultimately win the project, the delay meant that three other developers with different sites around East London had been able to approach retailers, who had committed to the various projects.
“There was only room for one regional mall,” says Sisa. “Luckily, the big retailers were split over all three competing sites, which meant no one could yet declare their site the winner. If I wanted to build my mall, I needed to win over the retailers.” This is exactly what Sisa did.
It wasn’t easy. They had already committed to other projects with much bigger, more established developers, and didn’t even want to meet with an unknown player who was new to the space. So Sisa camped out at their executive offices until they agreed to see him.
“I spent the whole day sitting in the reception of the CEO of one of the big five retailers,” Sisa recalls. “At 5pm he felt so bad that I’d been there the entire day that he agreed to give me five minutes.”
The pair hit it off, and two hours later Sisa promised to fly the retailer and his executives down to East London and put them on a helicopter so that they could view all three sites. “Ours was hands down the best location coming off the highway. I left it up to them to judge which site they wanted to be at, but the tactic worked. Within six weeks, all five major retailers were on board. This sealed our fate and destroyed our competition.”
For Sisa, the challenges were just beginning. None of the major construction companies wanted to work with him. They had JVs with other smaller contenders, and even though building Hemingways would be a lucrative R1,2 billion construction job, contractor after contractor said no.
Eventually, Sisa approached the management team of the top contractor in the sector and offered them all equity in a new entity. They turned him down flat. “So I started stalking the MD,” he says. “He called me and told me to stop talking to his friends and family, and showing up everywhere he went. But he agreed to discuss the job opportunity.”
Once Sisa convinced the MD, the rest of his team followed. The company received 17 resignations on the same day. “They were beyond furious with me. I received a call from the CEO, raging at me. I let him rage. I figured it was the least I could do. However, at the end of the phone call he told me that he would squeeze me out — no supplier in the whole of South Africa would do business with me after he had contacted them.
“Unfortunately, he had the power to do just that. We had to open within 26 months and I’d already lost two months. I needed to make a plan, and no one would work with us. We got shut out completely.
“We couldn’t get cranes, equipment, cement, shutters — even the concrete supplier refused to work with us. I flew with the team to Dubai to get our shutters, Austria for our cranes and Germany for our cement. We batched our own concrete on site, bent our own steel — we did everything ourselves and we finished the mall in 24 months. It was one of our greatest achievements.”
Completing the development wasn’t the end of Sisa’s challenges, however. The construction ran R180 million over spec because everything had to be imported, and when the mall opened in October 2009, South Africa was already feeling the effects of the recession.
“The banks had tightened their belts and most of my small tenants, including restaurants and boutiques, couldn’t get funding nor pay their rent. I suddenly had a 15% vacancy, which accounted for 27% of my income. We had massive over-runs and I had to scratch around and sell assets to make ends meet.”
It was the second time in his life that Sisa’s health suffered as a result of a setback. Again, he recognised the signs and managed his blood pressure and overall health more effectively.
For Sisa, overcoming adversity in business and life had become a necessary skill. The attempts by big corporates to squeeze him out were just the beginning of his challenges in the sector. “Forest Hill was delayed in court for six years — up until one month before we opened we were in court against another developer who wanted to shut us down.
“The Baywest site in Port Elizabeth was built as a JV after we finally decided to work with the developer of the site adjacent to ours, instead of continuing to fight each other in court for the development. It’s a very competitive industry.”
But with the right vision, guts and determination, it’s also incredibly rewarding. “When we built BT Ngebs, which I named after my grandfather, in Mthatha, everyone said I was crazy. A regional mall would never work there. Not only has it been incredibly successful over the past two years, but we are now building our first four-star hotel and entertainment node that includes movies, a casino and restaurants.
In fact, Sisa’s appetite for risk and his continuous quest for challenges has led to Billion Group becoming a precinct developer. Regional malls and smaller centres form the catalyst for these precincts. As with Baywest, first the mall is built, and then the entire precinct around it — including industrial parks, office buildings, hospitals and big automotive showrooms.
“We’ve reached a point where if we create the catalyst, they will come — we’re creating our own work as a developer.” In fact, in its current projects alone, Billion Group has R35 billion worth of development lined up for the next ten to 15 years. “And we always come in a few years ahead of target,” he says.
SA’s first black-managed and held company on the JSE
In 2010, Sisa consolidated his assets and formed a company called Rebosis Property Fund, which he listed on the JSE in May 2011. It was the first black managed and held property company on the JSE, as well as the largest IPO in the property sector.
Sisa kept his development assets in Billion Group, but moved the income assets into Rebosis. This included four commercial buildings and four shopping malls. The total value of assets was R3,6 billion, and the company had a market cap of R2 billion.
The IPO raised R1,6 billion, of which 40% to 45% covered debt still held by banking partners. Over the last six years Sisa has grown Rebosis into a R23 billion company that includes three malls in the UK.
Again in 2016, Sisa experienced major challenges as a consequence of market and financial media skepticism relating to the transaction between Billion Group and Rebosis.
“When I created and listed Rebosis, Baywest and Forest Hill were still vacant land, and were not included in the asset transfer. Rebosis is not a development business due to the higher risk associated with development.
“Once these properties were developed and opened after one-and two years respectively however, I sold them to Rebosis for R2,2 billion each. I also sold an asset management company and a property management business for an additional R560 million.”
There was huge pushback from analysts who questioned whether other shareholder interests were impacted by the fact that Sisa was the buyer and seller.
“There was a lot of enmity in the market; distrust and unwarrented negative publicity. Numbers were misquoted and shareholders got nervous. It took a toll on me. Competitors, sceptics and some analysts worked tirelessly to sabotage the process; major shareholders instigated negative media publicity.
“It was incredible watching how vicious they became. This resulted in a share price drop, as two shareholders swopped shares with a competitor who was quietly planning a hostile takeover, and had put pressure on major institutional shareholders to swap.
“You can view these challenges as a disaster, or as an opportunity. I went straight to my boards and shareholders to build back their trust. I had to work really, really hard, but I ended up in a stronger position than when this all started.
“Six months later we concluded the transaction with 88% shareholder approval, which is exceptional. Unfortunately, I’ve found myself with a 20% hostile shareholder whom I’m still dealing with to this day.”
Share prices quickly stabilised however, and over the course of the last five years, Rebosis has enjoyed a minimum growth of 8% per year, peaking at 11% in some years. This is in line with the property sector, which has been the top performing sector in the last three consecutive years.
It’s just one more lesson on that perilous road to entrepreneurial success. But if you keep your head held high and face each and every challenge — the journey will always be worth the price.