Shareholders of Accelerate Property Fund who have patiently waited for the embattled Fourways Mall co-owner to get back in the black will no doubt be pleased about last week’s sale of Cedar Square for a not insubstantial R630m, only marginally below its book value of R643.5m.
The 44,249m² shopping centre, diagonally across from Fourways Mall in northern Sandton, is the latest in a string of property sales clinched by Accelerate. CEO Abri Schneider, who joined the company in April 2023, has made impressive headway over the past two years to streamline Accelerate’s property portfolio and pay down debt.
The Cedar Square deal brings total disposals to date to about R2.5bn. Other notable sales in Sandton include The Buzz and Leaping Frog shopping centres and BMW and Ford showrooms, all in Fourways, and three office buildings. Accelerate sold its share of the Portside Tower on Cape Town’s Foreshore for R580m and in George it parted with the Eden Meander Lifestyle Centre. The disposals leave the Reit with a portfolio of about a dozen properties worth about R6.54bn.
The proceeds from Cedar Square, which is Accelerate’s most valuable asset after Fourways Mall, in which it has a 50% stake, will go a long way towards achieving management’s target of reducing the loan-to-value (LTV) below 40%. Since March 31 2025, the LTV has already dropped from 48.7% to 41.1%.
The unfortunate timing of an extensive redevelopment of Fourways Mall, which nearly tripled the centre in size and made it South Africa’s largest mall at 180,000m², was key to Accelerate’s post-pandemic financial woes. The project was completed in September 2019, shortly before Covid hit. In addition, the extension is believed to have been poorly designed and executed.
Until about 18 months ago, the mall was battling rising vacancies and falling rentals, which led to a sharp drop in earnings. Dividends were suspended, placing further pressure on an already weak share price.
However, management has since made huge progress in reducing vacancies and bringing shoppers back to the R8bn shopping centre. By March 31, the vacancy rate had dropped to 9.7%, down from a peak of about 24% in December 2024. A wave of new tenants opened shop last year, including Walmart, Anta sportswear, Birkenstock, Burnt Studios, Old School, Popsicle, RocoMamas and RPM Fitness. The Ster-Kinekor cinema was also revamped.
Fourways Mall’s revival comes on the back of a recent R400m capital expenditure programme to refresh and reposition it. Its improved fortunes helped narrow Accelerate’s loss after tax in the 12 months to March to R45.9m, down from R1.27bn the previous year.
Still, Accelerate is not out of the woods quite yet. The next big hurdle is securing the refinancing of its R3bn debt due in March 2027. Negotiations with funders are still under way.
Long-suffering investors are no doubt hoping that management will reinstate dividends sooner rather than later. But there’s no clear indication of when that will happen. Schneider tells the FM that before the board can consider resuming payouts, the company has to satisfy the solvency and liquidity test, and all debt covenants must be regularised.
The Reit’s interest cover ratio of 1.2 times also needs to be increased to at least 1.6. Schneider adds that a resumption of dividends depends on further debt reduction, improved liquidity, an LTV below 40% and “evidence that positive distributable earnings are recurring and sustainable”.
It’s not inconceivable that value chasers will start nibbling on Accelerate shares again given the colossal 78% discount to NAV at which the stock trades. Earlier this week, Accelerate touched 40c, slightly above the record low of 37c seen earlier this month, but down 45% from its February highs. Garreth Elston, MD of Golden Section Capital, says the steep discount is unlikely to narrow until the debt that matures in March 2027 is refinanced. Still, Elston says that given the rate at which management is selling assets and repaying debt, lenders have a commercial incentive to extend Accelerate’s facilities “rather than pursue a value-destroying business rescue”.
The other 50% of Fourways Mall is owned by Azrapart, which is in business rescue.
