JSE-listed Accelerate Property Fund on Wednesday posted stable financial results for the year ended March 31, reporting a 57.56c a share distribution, in line with guidance.
Since listing on the JSE in December 2013, the company’s portfolio has grown from about R5-billion to R12.3-billion, Accelerate COO Andrew Costa noted in an interview with Engineering News Online, adding that the company’s nodal strategy continues to bear fruit despite challenging market conditions.”
“Our core portfolio performed well in a challenging economic and sociopolitical environment in South Africa, while our offshore portfolio performed well above expectations, and is the foundation of a solid scalable international platform,” Costa said.
During the previous year, the real estate investment trust (Reit) invested significantly in the growth and development of Johannesburg’s Fourways node, with Costa remarking that the Accelerate board has prioritised consolidation and extracting value from existing assets though development and renovation.
Costa noted an acquisition in Poland, and acquisitions in general, have been shelved until Accelerate achieves its targeted loan-to-value ratio of 35%, currently at 39.9% (40.7% including offshore assets).
“We’ve been expanding significantly since listing, and we believe that it is prudent to consolidate at this time.”
He added that the Reit’s immediate focus is on ensuring the completion of the Fourways Mall, and emphasised that, in the interim, Accelerate would continue to dispose of nonstrategic assets and would look to complete a black economic empowerment transaction of about R1.2-billion, as well as sell assets valued at around R1-billion.
Those proceeds would be reinvested into core assets or used to reduce debt.
Accelerate’s nodal strategy remains a key differentiator within the local market. The strategy enables economies of scale within these nodes where any investment in improving specific properties, infrastructure or services benefits other properties owned by Accelerate in the same area.
The Fourways Mall redevelopment remains the key focus for the fund and the node around this property continues to demonstrate impressive economic fundamentals and potential.
The super-regional development of about 178 000 m² is currently 93% pre-let with offers having been received for the remaining space. The redevelopment is nearing completion, with a phased opening due to begin at the end of this year.
Accelerate’s lease escalations remain strong at 7.7% locally, while the weighted average lease expiry remained defensive at 5.5 years for the total portfolio.
Although vacancies across the portfolio increased from 7% to 10%, Costa explains that the increase is as a result of two large industrial and office tenants (26 000 m2 and 15 000 m2 respectively) leaving their properties, which, given the size of the tenants, and the size of office and industrial segments, had a disproportionate effect on the vacancy rate.
Additionally, Costa believes there is “huge potential” for the Reit to subdivide the vacant properties, which are situated in attractive areas, and capitalise once the market turns.
Moreover, Accelerate’s continued focus on tenant optimisation and retention has seen retail vacancies reduce from 8% to 5.5%.
The Reit’s European portfolio, predominantly in Austria, yielded a weighted average tenant turnover growth of 10.1% and was independently valued at €91.5-million, up from €82-million on acquisition in December 2016. The offshore portfolio comprises 8.3% of the fund’s total revenue, and provides diversification to hard currency.
“The underlying core of both Accelerate’s South African and offshore portfolios remains solid and we will continue to focus on extracting optimal value from our chosen nodes. Given this focus, the fund remains well positioned for the future,” Costa concluded.