JSE-listed real estate investment trust (Reit) Accelerate Property Fund’s maiden listed year proved resilient, with the company reporting a gross rental income of R699-million, up from R205-million in 2014.

Its projected yearly yield of 7.9% was also above the overall property sector yield, while it reported total distribution per share of 49.21c, in line with market expectations.

During a telephone interview on Monday, COO Andrew Costa told Engineering News Online that the company’s success had not been achieved without challenges. “We have done a lot of planning; it took us about a year to list. It was really about bedding it down and ensuring that we have the right culture in the company; making it a performance culture.”

He noted that, in Cape Town, where the company had offices in the foreshore precinct, the Reit used to outsource its property management to two different property management companies. “We have [now] consolidated it to one company; we found that worked a lot better,” Costa said.

He highlighted that the company also hired a new head of leasing to centralise its leasing portfolio.

“Our net cost to income ratio is just over 13%, where it was at about 18% one year ago. We are always working at getting more efficient and streamlined.

“Our total return for the year of 47.7% positions Accelerate as one of the leading performers in a highly competitive market,” Costa added.

Retail vacancies also remained fairly constant during the year, while office vacancies decreased significantly from 18.1% to 11.72%.

Accelerate reported that the vacancy across the portfolio improved to 8.8%.

Short-term debt of R358-million was successfully refinanced and the fund remained conservative, having fixed 87.7% of its total debt at a blended interest rate of 7.35%. Post year-end, the swap maturity profiles were extended to March 31, 2019, from July/October 2017.

“We have currently hedged 87.7% of our debt over a weighted average term of 2.2 years to mitigate an expected cycle of interest rate increases in the domestic market. During the year under review, we successfully reduced our loan to value ratio from 38.8% to 35.04%, providing further headroom for expected growth,” Costa highlighted.

Post the reporting period, Accelerate acquired the property holding companies for six properties currently tenanted by KPMG and KPMG Services. The purchase consideration of R850-million was fully funded through a debt package.

“KPMG is an exceptional counterparty to transact with. [Its] blue-chip status, combined with a 15-year lease at a yield of 8% provides a defensive underpin to our portfolio.”

The assets included the KPMG Crescent and sky-bridge off Jan Smuts avenue, as well as Wanooka Place, in Parktown, and other regional A-grade offices tenanted by KPMG.

Costa noted that, although the company’s office portfolio had expanded owing to the acquisition, Accelerate’s overall portfolio would comprise about 15% office space, 15% industrial property and about 70% retail.

FOURWAYS PRECINCT
Costa reiterated that the company would remain focused on its retail portfolio, with its primary concentration being the Fourways Mall development and refurbishment, which would result in the creation of a “much anticipated” super-regional centre in the dynamic Fourways node.

He noted that the start of construction on the R2-billion, 90 000 m² development was imminent and would expand the existing Fourways Mall into a 170 000 m² centre.

Costa noted that there had been a slight delay in the start-up of construction, which should be completed in three years. “We had hopes that the developer would have started already, but because it is such a big development, we wanted to ensure that [everything goes right], rather than rush it,” he said.

The taxi rank, however, had already been moved.

As part of the development, Fourways Precinct would undertake fundamental infrastructure and traffic upgrades to significantly improve access to the centre.

Accelerate and Fourways Precinct would each own an undivided share in Fourways Mall, including the new development and the parties would have an option to acquire further undivided shares from the other to ensure equal ownership in the aforementioned redeveloped mall based on a capitalisation rate of 7%.

Accelerate was currently engaged in advanced negotiations with Fourways Precinct, and its associated entities, regarding the early exercise of the option to equalise ownership, at an amended acquisition capitalisation rate of 8%.

A NEW MELROSE ARCH
Meanwhile, Costa told Engineering News Online that the company would also focus on redeveloping its 80%-owned Charles Crescent property, in Kramerville, into a “new Melrose Arch”.

Situated 3 km from the Sandton central business district, he enthused that the area had become popular, with designers, furniture shops, a burgeoning nightlife and restaurants having been established.

He noted that with the City of Johannesburg’s bus rapid transit route in the vicinity, as well as easy access to highways, the area was even more attractive. The redevelopment of the crescent could possibly include residential development too, he hinted.