Andrew Costa, COO of Accelerate
Accelerate Property Fund, the JSE listed Real Estate Investment Trust with significant exposure in the Fourways node, Johannesburg, reported solid results for the interim period ended 30 September 2014. Distributable profit after taxation attributable to equity holders of R141.6 million was reported, marginally above the pre-listing forecast of R141.2 million.
Distribution per share of 23.99 cents commensurately exceeded the pre-listing forecasted distribution of 23.93 cents per share.
“We are pleased to have delivered on our pre-listing forecast despite challenging market conditions. During the reporting period we focused on prudent debt management and successfully launched a Domestic Medium Term Note Programme which was significantly oversubscribed.
“We optimised the portfolio, significantly reduced the office vacancy rate in the portfolio from 18.1% to 10.3% and kept a tight handle on costs,” commented Andrew Costa, COO of Accelerate.
As at 30 September 2014, Accelerate’s portfolio consisted of 51 properties, independently valued at R6.126 billion. During the reporting period, the Company invested R23 million in the refurbishment of the Thomas Pattullo office property in Foreshore, Cape Town on the back of a long-term lease with Bytes Technology. The completion date for this project is December 2014.
The portfolio was further optimised through the disposal of the Willows Shopping Centre in Pretoria East, for a purchase consideration of R77.1 million resulting in a profit of R12.1 million.
Short-term debt of R358 million was successfully refinanced and the Fund remains conservative having fixed 89.7% of its total debt at a blended interest rate of 7.18%. The weighted average of the swap term is 2.86 years.
“Our debt is fixed at 7.18% with a weighted average maturity of 3.24 years. Accelerate aims to hedge a minimum of 70% of total debt at all times to mitigate an expected cycle of interest rate increases in the domestic market. Although slightly higher than the sector average, we are comfortable with a loan to value ratio of 39.1% given the proven quality of our properties particularly in the Fourways node,” commented Andrew Costa, COO of Accelerate.
During the reporting period Accelerate received approval from the JSE for its R5 billion domestic medium term note (“DMTN”) programme. A senior secured rating of AA-(za) and senior unsecured rating of BBB+(za) from Global Credit Ratings Company (GCR) was achieved. The first issuance was in September 2014 and was significantly oversubscribed. (An important milestone in further diversifying Accelerate’s funding base.) In total R701 million debt was raised via the capital markets in 2014.
Accelerate earned a gross rental income of R335.8 million for the reporting period, comprising net rentals of R246 million and R75.3 million of operating expense recoveries.
Net property expenses of R23.6 million (being 9% of revenue before recoveries), in conjunction with R14.49 million other operating costs (being 5.6% of revenue before recoveries), resulted in a net cost-to-income ratio of 14.6% (33.7% gross cost-to-income ratio).
“We remain well-positioned to unlock distribution growth through the development of Fourways Mall into a super-regional centre. In addition we are considering strategic acquisitions as well as organic growth opportunities through the expansion and upgrade of existing properties and development of bulk,” concluded Andrew Costa, COO of Accelerate.
Distribution of 23.99 cents per share
Launch of significantly oversubscribed Domestic Medium Term Note Programme
28.4% (including current distribution) Return on Equity post listing (10 month period)