Accelerate Property Fund has published its financial results for the six months ended September 2021, reporting an increase in rental recoveries to 91.4%.
Rental assistance of R11.2 million was provided during the period, compared to R100 million in the prior comparative years.
Consequently, distributable income increased to R135.4 million from R11.6 million in the comparative period with revenue of R513.2 million reported for the six months to 30 September 2021 (H1 2020 R511.6 million).
“Our response to Covid-19 has been clear, structured and well-executed. Whilst property fundamentals will remain subdued in the short-term, Accelerate has emerged stronger and more robust from the pandemic and is well positioned to meet the changing needs of the market as the property landscape continues to evolve,” commented CEO Michael Georgiou.
Non-recovered income mainly related to tenants who had limited trading capabilities under lockdown level 3 including entertainment offerings (Bounce and gyms), tenants in business rescue (Ster Kinekor and Virgin Mobile) and smaller tenants who are still recovering from the impact of Covid-19.
The fund used negotiations on rental assistance to establish longer leases, optimise its tenant mix and right size tenant boxes during the period. As a result, the weighted average lease expiry (WALE) increased from 4.9 years to 5.9 years, with contractual escalation rates (excluding the offshore portfolio) at 6.5%.
However, due to the impact of the pandemic, vacancies, especially in the office sector remain a concern.
“The fund did well in filling a significant number of vacancies in our Foreshore, Cape Town portfolio. From a retail perspective we concluded a long-term lease with Clicks in Eden Meander shopping centre and substantially reduced vacant space at our Bela-Bela shopping centre. Most of the vacancies remaining in the portfolio relate to B- and C-grade office space as well as low-rental industrial space, resulting in total vacancy by revenue of 9.5%,” commented Chief Operating Officer, Andrew Costa.
“We will continue to repurpose vacant space and utilizing existing bulk space at our shopping centres to introduce alternative revenue streams through storage, residential or shared office offerings,” Costa continued.
Post the reporting date, on the 22nd of November 2021, Accelerate announced the disposal of its offshore portfolio comprising of nine big-box Do-It-Yourself (DIY) retail stores (six in Austria and three in Slovakia) which are tenanted by OBI GmbH & Co Deutschland KG, one of the largest DIY retailers in Central and Eastern Europe, to Slate Asset Management for a consideration of €87.4 million (about R1.55 billion).
“Our disposal strategy supports our strategic step-change in focusing on key nodes in Johannesburg, Cape Town and George and will reduce the group’s LTV from 47.8% to approximately 42%. This will not only strengthen the balance sheet and improve Accelerate’s credit rating, but will support further market confidence in the group,” remarked Georgiou.
Accelerate expects that a purely nodal strategy will allow for greater diversification across asset classes and economies of scale, whilst allowing it to focus on nodes with the strongest property fundamentals.
“We believe the impact of Covid-19 going forward is starting to dissipate. Notwithstanding ongoing recovery, considering potential further waves and the subdued economy, it will likely take another 12 to 18 months before the portfolio settles at pre-Covid levels,” commented Costa.
“The Fourways node remains resilient as evidenced by the strong trade at our smaller centres. We believe that this positive trading will soon include the much larger destination shopping centres such as the Fourways Mall super-regional centre,” he concluded.
The REIT did not declare an interim distribution but guided that, subject to its financial position and liquidity, it will consider the payment of distributions for the year ending 31 March 2022.
