Accelerate Property Fund has published its financial results for the year ended March 2024.
“High finance costs and low economic growth provided significant headwinds during the year. Our focus, however, remained on cleaning up the balance sheet and improving portfolio fundamentals. Most of these benefits will only flow to the bottom line in future reporting periods,” comments Accelerate’s Joint CEO, Abri Schneider.
Optimisation of the Group’s balance sheet. through disposals, remains a key strategic focus to address the reduction of debt and its SA REIT loan-to-value ratio (LTV). Accelerate disposed of two assets during the reporting period with a combined gross-lettable area (GLA) of 17 917m2 for a cumulative amount of R202 million (net of selling costs).
Post the reporting date, the Group transferred Eden Meander, Brooklyn Place, and 9 & 10 Charles Crescent with a combined GLA of 40 935m2. The proceeds from these disposals of R563 million (net of commission) were used to settle debt.
Sales agreements for a further three assets to the value of R176 million, with a GLA of 44 153m2 and a combined vacancy of 64.70%, have been concluded.
Vacancies increased during the year from 18.3% as at 31 March 2023 to 21.1% as at 31 March 2024. While disposals during the reporting period reduced vacancies by 17 917m2, there was a negative result in overall vacancies due to lease terminations resulting in an additional 1 082m2 of vacancy. The weighted average rental across its portfolio decreased to R203.90 per square meter from R207.80 per square meter in the prior fiscal year due to reversions which were offset by contractual escalations.
The Group’s rental income decreased by R27.6 million from R674.1 million to R646.5 million, driven by a 17.3% average decrease in retail rentals. Property expenses decreased by R1.9 million from R335.8 million to R333.9 million with the main contributor utility costs (including rates and taxes) which increased by 7.9%, Other operating costs and administrative costs increased by 16.5% due to the increased staff costs from severance packages paid to exiting directors and increased professional fees.
The Group’s finance costs were 42.4% higher than the prior year due to a R37.5 million interest accrual that related to the prior year, a current year accrual of R47.2 million and R71.1 million due to the rebuilt claim to the related party. Debt to the extent of R202 million was reduced following the disposal of Ford Fourways and the Leaping Frog Shopping Centre.
Fair value adjustments relating to investment property reduced from R809.2 million to R354.8 million due to the stability in its asset base whereas the derivative had a negative fair value adjustment of R41.5 million compared to the positive adjustment of R64.6 million in the prior year due to increased interest rates. Expected credit losses increased significantly due to bad debt write-offs and increased provisions, especially in Fourways Mall.
Capital expenditure (capex) remains a strategic objective for the Group with R38.2 million spent on assets during the reporting period (31st March 2023: R47 million) including investment properties and non-current assets held for sale.
Accelerate continues to engage with its funders on the extension of its debt facilities. Post yearend, Rand Merchant Bank (R1.1 billion) and Sanlam (Sasfin and STM – R302 million) agreed to extend their various facilities/debt notes to the 31st of March 2025 and the 30th of August 2024 respectively. A further R203 million was extended by RMB to the 31st of May 2025.
The increase in interest rates has significantly impacted the Group’s weighted average cost of funding which increased from 10.45% as at 31 March 2023 to 11.48% as at 31 March 2024. Accelerate’s interest cover ratio (ICR) remained at 1.7 times as per the prior year. The impact of increased finance costs was partially offset by the proceeds from disposals and a positive impact from interest rate swaps.
Finance costs were R569.4 million for the year compared to R400.4 million in the prior year with its SA REIT LTV having increased from 48.20% as at 31 March 2023 to 50.30% as at 31 March 2024, due to a reduction in fair value of its portfolio of R354.8 million.
Having considered the Group’s solvency and liquidity, Accelerate’s Board concluded that the Group is in a sound financial position to meet its foreseeable cash requirements and to continue trading as a going concern.
Acclerate’s SA REIT Funds from Operations (FFO) per share amounted to a loss of 0.72 cents for the year ended 31 March 2024, which was not calculated in the prior year. A recalculated SA REIT FFO for 2023 amounted to 10.72 cents per share. Its Board resolved not to declare a dividend for the year ended March 2024 (March 2023: nil).
At yearend, Accelerate’s portfolio comprised 27 assets with a total value of R8.7 billion (investment properties including non-current assets held for sale) and a GLA of 361 364m2.
