Accelerate Property unlikely to declare dividend in 2021 due to Covid-19
The co-owner of the Fourways mall has also opted not to do so for its 2020 year as Covid-19 batters the property sector
Accelerate Property Fund, the co-owner of Africa's largest shopping centre, the R9bn Fourways Mall, has pleaded with its shareholders to be patient over the next 18 months as it focuses on helping struggling tenants and holds off on paying a dividend until 2022.
Most property funds have put dividends on hold for 2020 but have suggested they would pay out income in 2021.
But COO Andrew Costa said the Covid-19 pandemic meant the group needed to hold onto large amounts of cash for the next few months.
The group opted not to declare a distribution for its year to end-March 2020, when it swung into an R897.89m loss, from a profit of R565.8m previously, amid a downward adjustment of about R1bn in the value of its properties.
As of the end of March, Accelerate Property’s portfolio was valued at R12.6bn.
“Prior to Covid-19, Accelerate was on an upward trajectory, particularly Fourways Mall, our flagship asset which relaunched in August. But then the pandemic broke in SA and this unexpected event put things in disarray,” Costa said.
“We have had to shift our focus from paying a dividend to supporting our tenants. Some tenants have received rent breaks. We believe we have taken a safe decision in choosing not to pay a dividend for 2020 and 2021. Supporting our tenants is about supporting the country. We believe in the wellbeing of SA and don't want to see people out of work,” he said.
Accelerate said the Covid-19 situation was highly volatile and continually evolving and the fund was working with its tenants to secure long-term income streams, limit vacancies and ensure long-term sustainability for all parties involved.
“The fund does not, however, expect a significant reduction in long-term rentals streams at our larger retail centres as rentals currently charged to tenants are at, or appreciably below, market-related rentals,” Costa said.
The group's portfolio vacancy rate sat at 10.8%, at the end of March, with a 90% tenant retention ratio.
Group revenue of R1.05bn was earned during the period, compared with R1.19bn in the year to March 2019, and an operating profit of R670m was earned compared with R813m for the comparative 2019 period.
Costa said the reduction in revenue was mainly because of the sale of noncore assets during the year under review, reducing the number of properties in the portfolio from 62 to 51 and gross lettable area from 601,506m² to 529,363m².
“We want to focus on the Fourways node in Johannesburg and the Foreshore node in Cape Town. I believe that as we emerge from this uncertain pandemic period the resilience of a nodal approach to property investing will become obvious,” he said.
Accelerate had plans to develop residential stock near Fourways Mall. It was already under way with the development of 500 residential units behind the Buzz Shopping Centre on Witkoppen Road.
The group reported rental collections of 61% for April and June 2020 respectively, with a collection rate of 49% for May 2020.
The successful acquisition of an additional 12.1% of Fourways Mall, for a total 50% ownership, was settled in debt to the amount of R907.8m, which increased the group’s loan to value (LTV) from 39% in the prior year to 45.5%.
One-off costs related to the launch of Fourways Mall, above-inflationary municipal charges and conservative provisions put in place regarding the recoverability of arrears due to the lockdown resulted in an increase in the cost-to-income ratio from 15.9% to 26.2%.
Accelerate wanted to decrease its LTV to below 40%.
“Property sales to the value of almost R600m are at various stages of completion. We are also looking at viable options to dispose of another portfolio of assets. These disposals are expected to reduce LTV by between 3% and 6%,” said Costa.
Accelerate’s share price rose 3.75% to close at 83c.
Update: July 29 2020
This article has been updated throughout.
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