Accelerate Property Fund is a real estate investment trust (Reit) listed on the JSE comprising 69 properties worth R11.6bn. Based on revenue, the portfolio is split between retail (67.4%), office (26.5%), industrial (6.1%) and European retail (2.7%).
The company differentiates itself with its nodal strategy by assembling a number of properties in specific locations. Three such nodes have been targeted, including Fourways and Charles Crescent in Johannesburg and the Foreshore in Cape Town.
The year ending March 2017 was both transformational and eventful for Accelerate. The company concluded R2.8bn worth of acquisitions comprising of the Portside building for R755m and the Murray & Roberts building for R165m, both located in Cape Town’s Foreshore, Eden Meander in George for R365m, the Citi Bank building in Sandton for R300m, and, lastly, its first offshore acquisition in Central and Eastern Europe (CEE) for R1.2bn.
These acquisitions represent growth of 33% on the 2016 portfolio value and were executed at a combined average yield of 7.3%.
The Portside and Murray & Roberts buildings complement the four office buildings that Accelerate already owns in the node and brings the company’s total exposure to the Foreshore to R1.3bn. Eden Meander, a convenience and lifestyle shopping centre of 28,390m², was acquired to complement the strong retail bias of the fund with an opportunity to expand the current centre with an additional 10,000m² of bulk. It was acquired at a yield of 9.1%.
The retail bias of Accelerate is underpinned by the iconic Fourways Mall, which is being redeveloped in two phases and will take the total GLA from around 68,000m² to over 170,000m², making it one of the few super-regionals in Gauteng. The redevelopment is expected to be completed in 2018.
The enlarged mall will also feature a differentiated entertainment offering through the introduction of the first KidZania in SA, a Mexican chain of family entertainment centres operating in 19 countries. KidZania is expanding into a further five countries including SA and is designed for children aged between four and 14 years.
It offers a four-hour experience where children can explore a miniature world as well as learn about different professions.
KidZania is likely to lead to increased footfall, dwell time and spend per head.
The direct cost for Accelerate to bring the company to SA will be R20m. On completion of the redevelopment of Fourways Mall, Accelerate will acquire their shareholding in the mall at a pre-agreed yield of 8%.
On the offshore side, Accelerate made its first acquisition outside SA in the CEE region through a newly established platform named Accelerate Europe. The strategy of Accelerate Europe is to acquire single tenanted buildings let to multinationals on long-term leases.
The initial portfolio consists of nine assets located in Austria and Slovakia acquired for €82m at a 7% yield. The acquisitions made in the 2017 financial year are clearly strategic and are meant to enhance the quality of the portfolio and diversify the fund into offshore markets.
These acquisitions complement an already strong asset base.
Accelerate reported one of the highest like-for-like numbers in the sector across all subsectors, with retail achieving 8.1%, while office and industrial were at 8% and 7.7% respectively. This is impressive considering the current tough economic environment in SA.
As a result of the significant acquisitions made in 2017, the cost of bringing KidZania to Fourways Mall — as well as the equalisation costs of acquiring Fourways Mall — Accelerate has guided no growth in its dividend per share payouts for the year ending March 2018.
Minimal growth is also expected for the 2019 financial year. The share price has subsequently taken a knock and as at end-June 2017 was down by 20% year to date. That placed the stock at a forward yield of 10.3%.
The minimal growth projected for the next two years comes on the back of management’s willingness to take short-term pain for long-term gain. Growth is expected to be resumed once the redevelopments on the latest acquisitions and Fourways Mall are complete.
• Lawrence Koikoi: listed property analyst, Stanlib
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