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Accelerate ends half-year on strong note, acquires Poland portfolio

20th November 2017

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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Despite the uncertain macroeconomic and political environment, the value of Accelerate Property Fund’s property portfolio increased by 30% year-on-year to R11.8-billion in the six months ended September 30, resulting in a total gross lettable area (GLA) of 637 577 m², it said on Monday.

The JSE-listed real estate investment trust (Reit) also reported net asset value growth of 21.3% year-on-year.

“We continue to work hard to extract and enhance the value of our local portfolio through active asset management and the redevelopment as well as upgrading of our existing portfolio.

“Organic growth is currently achieved through the redevelopment of our flagship Fourways Mall, Cedar Isle BMW bulk development of 8 400 m², the planned redevelopment in the Cape Town Foreshore and 3 085 m² extension at Eden Meander, in George,” said Accelerate CEO Michael Georgiou.

The company continues to target a loan-to-value (LTV) ratio of 35% to 40%, but given its recent acquisitions Accelerate sits at an elevated LTV; however, numerous steps are being taken to reduce leverage.

These include ongoing negotiations regarding a potential black economic empowerment transaction of about R1.2-billion, the recycling of certain assets valued at R1-billion, the sale or joint venture on available bulk, as well as the development and sale of residential units at the Cape Town Foreshore.

The Fourways Mall redevelopment remains the company’s focus and it is expected to be completed at the end of the third quarter of 2018.

“Fourways Mall is expected to be at close to 200 000 m² of GLA upon completion - this includes Leroy Merlin adjacent to the mall, transforming it into a super-regional mall anchoring the Fourways node, attracting top-quality tenants in the retail and office segments.

“We are very excited about the broader development of the node and expect it to become the most dominant retail market in South Africa,” said Georgiou.

Meanwhile, Accelerate achieved positive rental reversions of 3.1% and a tenant retention rate of 90.1%, while the weighted average lease expiry remained defensive at 5.3 years.

Lease escalations achieved were strong at an average of 7.5% although vacancies increased somewhat from 6.91% as at March 31 to 8.38% as at September 30.

The company’s cost-to-income ratio improved to 15.3% from 16.9% as at March 31.

“Significant letting progress has been made at Portside Tower, based in Foreshore, Cape Town, and at Citibank, in Sandton.

Vacancies at Portside reduced from 74.1% at June 30, 2016 to 21% at the end of the reporting period due to the successful letting of smaller boxes and the high demand for P-grade green buildings in the Foreshore node.

“When we acquired the Citibank building in Sandton, in February, the property was 22.9% vacant. Through concentrated efforts, our leasing team worked hard to decrease these vacancies to 5.9% within seven months, well below the average A-Grade office vacancies in Sandton of 13%, according to the Rode property report,” COO Andrew Costa commented.

POLISH EXPANSION
Meanwhile, Accelerate is looking to acquire a portfolio of five single-tenanted, long-lease, light industrial properties in Poland for an aggregate purchase consideration of €41.9-million, inclusive of transaction costs.

Comprising of warehouse and logistics facilities which are either newly built or recently developed by Panattoni Development Company, the properties are characterised by strong locations with good road access, exceptional visibility and are situated in strategic manufacturing nodes within Poland.

“Poland is an attractive investment destination, supported by rising real gross domestic product growth and real private consumption. The country has good infrastructure and excellent access to neighbouring markets.

“The growing manufacturing and logistics sector is benefiting from lower operating costs, underpinning the strong investment case in this sector,” the company said in a statement.

Georgiou highlighted that the portfolio complemented its current bespoke offshore strategy to invest in long-term single-tenant net leased properties that are strategic to blue-chip multinational or large regional tenants in the region.

“The acquisition increases our presence in Europe with assets that provide long-term euro-denominated income streams backed by high-quality tenants,” he added.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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