CEO Andrew Costa
JSE-listed Accelerate Property Fund on Monday reported year-on-year distribution growth of 10.93%, translating into a distribution a share of 26.62c for the six months to September 30, up from 23.99c in the six months to September 2014.
Accelerate COO Andrew Costa attributed the solid growth during the period to the fund’s focus of extracting maximum value from its retail centres by reducing vacancies, optimising the tenant mix and remaining hawkish on costs.
In a telephone interview, he told Engineering News Online that the current economic headwinds were a big concern, but that the company’s strategic acquisitions, paired with centralised vacancies through the appointment of a lease head, would help it weather the economic storm.
Accelerate’s portfolio had grown by 38% from R5.5-billion at the time of listing in December 2013, to R7.6-billion in the six months under review, mainly as a result of the R850-million acquisition of six properties currently tenanted by KPMG. The number of properties in the portfolio also increased from 51 at listing to 57.
The properties included the iconic KPMG Crescent and sky bridge off Jan Smuts avenue, as well as Wanooka Place, in Parktown, and A-grade offices with on-site parking in Polokwane, Port Elizabeth and Secunda, with a combined gross lettable area of 46 941 m2.
Further, the fund highlighted that its net cost-to-income ratio increased from 14.6% to 17.93% year-on-year, also owing to tenant installation related to the KPMG acquisition.
During the reporting period, Accelerate refinanced debt of R452-million through the debt capital markets, extending the fund’s weighted average loan term to 3.9 years, compared with 2.9 years as at March 31.
The fund also reported that 76.8% of its total outstanding debt was fixed at a weighted cost of 7.88%. Gearing increased from 35.23% at the end of the prior reporting period to 39.12%, mainly as a result of the KPMG transaction.
Although the loan to value ratio may exceed the 40% benchmark in the short term, management was targeting a range of 35% in the medium to longer term.
Meanwhile, the focus on tenant optimisation and letting activity resulted in vacancies reducing to 6.69% from 8.81%, while the weighted average lease period improved from 2.87 to 4.56 years during the reporting period. If planned vacancies were excluded, actual vacancies reduced to 5.46%.
The redevelopment and expansion of the Fourways development started during the reporting period, with almost 90 000 m2 of retail space being added, creating one of the largest malls in Africa. The development was undertaken outside of Accelerate and, as such, the fund carried no development risk.
“We have really good-quality assets. Our 50% stake in the completed super regional shopping centre will be a game changer for the fund and the catalyst to taking the Fourways node, which is demographically very strategic, to the next level,” Costa commented.
He added that the company’s Western Cape assets would also further bolster its growth strategy, noting that the company focused more on the office space in the region, as Cape Town did not have the same footfall as Johannesburg in the retail sector.
The fund expected its R840-million acquisition of 50% of the premium-grade Portside office building in Cape Town from Old Mutual Life Insurance to be finalised early in the new year.