Disposal of European portfolio bolsters Accelerate’s balance sheet

Fourways Mall

Accelerate Property Fund has published its financial results for the year ended March 2022, declaring an increase in its distributable income to R210.5 million (FY2021: R24.7 million loss). A final distribution for the year of 21.98 cents per share was declared, equating to a 100% pay-out ratio.

“Accelerate has emerged from the pandemic in a much stronger position, with a much healthier balance sheet and a solid foundation for growth”, commented CEO Michael Georgiou.

“The disposal of our offshore portfolio has always been an option, should the domestic macro-environment not support an improvement in Accelerate’s capital structure. To this end, we successfully sold our European portfolio and reduced our debt with R1.4 billion from R6.0 billion to R4.6 billion during the financial year. This lowered our LTV by around 6% from 48.5% in the prior year to 42.8% and created cash reserves and undrawn debt facilities of R223 million,” he added.

The disposal further resulted in Accelerate reducing its short-term borrowings by R1.1 billion.

We are very encouraged by the support from our larger shareholders holding 83.5% of Accelerate’s shares to participate in the dividend reinvestment programme”, he said.

The board further bolstered governance, depth, and experience with the appointments of former Finance Minister Tito Mboweni, and James Templeton as independent non-executive and non-executive director, respectively.

In addition, related party matters stemming from the construction and equalisation of Fourways Mall was agreed on and approved by the board post the reporting period. Accelerate is of the opinion that these important steps, in addition to its improved balance sheet and strong retail performance, will support a new growth narrative with both debt and equity investors.

The group reported an increase in rental recoveries as a percentage of rental invoices from January to March 2022 of 92% with Covid-19 related rental assistance reducing to R35.1 million for the year under review, compared to R182.5 million in the prior financial year.

Fourways Mall, the largest mall in Africa, opened only three months before the first Covid-19 wave and subsequent lockdowns in South Africa. Notwithstanding the fact that the mall has not settled post opening, it continues to report gradual and consistent improvement in trading densities, with 16% year-on-year growth during the review period. This improving performance translates into a 90% occupancy level, excluding the space covered under the construction head lease.

Improved leasing activity in Fourways saw several new tenants opening, including House & Home, Pep Home, Factorie, and PQ among others. JB Active occupying 2 742m2 will open in August 2022.

Accelerate further reported that a delegation from KidZania’s head office in Mexico visited Fourways Mall in June 2022 with plans to complete leasing and costing agreements soon.

Fourways Mall holds a substantial insurance claim relating to losses incurred because of Covid-19 and the group has instituted legal proceedings in this regard.

“Our retail vacancies remained stable at 9.5% with a weighted average lease expiry (“WALE”) of 3.6 years. We made a significant progress in leasing at Cedar Square and Eden Meander, with vacancies at Eden Meander reducing to under 1% off the back of a new 5-year lease with Clicks Group”, commented Chief Operating Officer, Andrew Costa.

Clicks Group opened in April 2022, taking vacancies to almost zero at Accelerate’s Eden Meander mall. The development of additional bulk is currently under negotiation. The group is currently focusing on activating all areas in the centre with the strategic placement of anchor tenants. The centre has reported a turnover growth of 19,7% on a year-on-year basis.

Office rentals of 87.5% by revenue are underpinned by long-term leases with a Weighted Average Lease Expiry (WALE) of 5.2 years. Office portfolio vacancies by revenue consequently amounted to 8.2%. Measured on a gross lettable area basis, vacancies of 29.5% was reported, predominantly due to the B- and C-grade nature of the vacancies. Many of these properties are currently held for sale or redevelopment.

To date, Accelerate has disposed of a total of R3.2 billion of assets, with the most recently completed being the disposal of its European portfolio. 

Going forward, we will intensify our strategy to diversify funding to create a more balanced pool of suitable funders to manage prudential exposure limits, encourage competitive pricing and build adequate liquidity buffers”.

We will continue to engage with our funders to restructure our debt exposure to meaningfully extend our debt expiry profile and reduce our overall cost of funding whilst managing our concentration of expiry risk”, he concluded.

No interim dividend was declared for the reporting period.