Fourways mall delays put damper on Accelerate Property Fund’s results
Executive management has staked the company’s future on the success of the Fourways node
Delays in revamping Johannesburg’s Fourways Shopping Centre continue to put pressure on Accelerate Property Fund’s performance, with the company releasing uninspiring results for the six months to September.
Since Accelerate’s listing five years ago its executive management has staked its future on the success of the Fourways node, given that its largest assets, including the flagship shopping centre, are there.
Upgrades to the mall, Africa’s largest at 178,000m² and worth R9bn, were meant to have been completed by the end of September. The mall, to have about 450 stores including SA’s first KidZania entertainment concept, is now expected to relaunch on April 25 2019. About 64,000m² of the centre is trading.
In releasing financial results for the six months to end-September, COO Andrew Costa said on Monday most of his time was spent on securing quality tenants at the mall and trying to lower Accelerate’s debt. The company’s loan-to-value was 42% at the end of the reporting period and would be about 34% by the end of March 2019.
Fourways Shopping Centre will be half-owned by Azrapart and Accelerate respectively. Azrapart is a private development company of which Accelerate’s CEO, Michael Georgiou, is the largest shareholder. Accelerate itself has spent no money on the mall’s redevelopment.
Azrapart has spent more than R30m on the refurbishment and additions to the mall, and R400m on roads and infrastructure.
Costa said Accelerate Azrapart had not overspent on the R30m redevelopment budget, except that it initially planned to spend only R250m on supporting infrastructure. Accelerate’s dividend per share for the six months to September fell 5.28% to 27,26021c compared with 28,77713c for the six months to September 2017.
Costa said it was very difficult to finish a project of Fourways Shopping Centre’s size on time while SA’s economy was "in its worst state in 25 years".
"We listed Accelerate on the premise that this mall would be our flagship asset and that it would drive our income for years to come. I know it has taken time, but we are very happy with the progress given that we are in the worst economic conditions in a quarter of a century," Costa said.
The value of Accelerate’s portfolio rose from R12.3bn at the end of March to R12.6bn at the end of September. The overall vacancy factor across the portfolio fell from 10.04% at the end of March to 7.8% at the end of September. Accelerate is also selling land next to its The Buzz Shopping Centre in Fourways to a developer who will build a residential development there.
Accelerate will receive development profits from this.
"With various positive steps under way to reduce gearing and undertake share buybacks, filling of vacancies, together with significant earnings-enhancing initiatives such as The Buzz residential development, coupled with the ultimate 50% ownership of what will arguably be the leading super-regional shopping centre in Southern Africa, the fund is well positioned for the medium to long term," Costa said.
Evan Robins, a fund manager at Old Mutual Investment Group, said Accelerate’s results had not disappointed a market eager to find out how successful Fourways Shopping Centre could be for the fund.