Accelerate Property Fund has published its financial results for the year ended March 2023 with trading densities at its key retail centres showing robust year-on-year increases.
Fourways Mall improved 18% between December 2021 to December 2022 from R3 131 per square metre to R3 699 per square metre with parking revenue having increased by 12% year-on-year.
The REIT’s Eden Meander in George in the Western Cape continued to report double digit growth in year-on-year trading densities and turnover figures. Its monthly average trading densities to 31 December 2022 increased by 14% to R2 522 per square metre compared to R2 215 per square metre. In the prior period, the centre further benefited from strong seasonal trade with average trading densities increasing to R4 752 per square metre in December 2022.
Cedar Square in Fourways also showed positive monthly trading density growth of 7.7% to R2 366 per square metre.
“Our strong focus on letting activity reduced portfolio vacancies by 4.7% from 21.1% in the prior financial year to 16.4%. At the end of the financial year, Cedar Square had a vacancy of 4.8% with all retail space leased and the remaining office space currently under negotiation,” comments joint CEO of Accelerate, Abri Schneider.
“Trading at some of our community shopping centres such as the Buzz and Waterford has also improved to well above pre-Covid-19 levels with vacancies at both these centres close to zero percent.”
Revenue from continued operations remained stable at R895 million (FY22: R897 million) whilst management’s ongoing focus on costs resulted in a 2.4% reduction in the cost-to-income ratio from 25.8% to 23.4%.
The REIT reported a contraction in its interest cover ratio (ICR) to 1.8 times (FY22: 2.1 times) mainly because of prevailing higher interest rates negating most benefits of the disposal programme, having received approval from its funders to temporarily reduce overall ICR covenant levels to 1.7 times, up to the end of the 2023 financial year.
It is currently in negotiation with funders to extend this covenant relief for a minimum further two reporting periods due to the progress made on debt reduction and improvement in revenue streams being diluted by the 425 basis points increase in interest rates since February 2022.
Accelerate’s loan-to-value (LTV) increased marginally from 42.8% to 44.8% predominantly because of an R809 million downward fair value adjustment in investment properties offsetting the positive LTV effect of non-core property disposals. As part of its debt reduction strategy, five non-core properties were disposed of during the year under review to the value of R146.7 million. A further four non-core properties to the value of R292.4 million are held for sale with transfer expected in FY24. Proceeds from these disposals are allocated towards reducing debt.
54% of the fund’s total debt expires between April 2023 and December 2023. This debt concentration is due to joint re-financing arrangements entered into between the Group and its main funders during the Covid-19 pandemic. The bulk of the balance of expiring debt is held by key relationship funders and is in the process of being termed out.
Post the reporting period, expiry dates on facilities totalling R209.3 million were successfully extended as the overall comprehensive refinance process is still underway.