Accelerate Property Fund, the joint owner of South Africa’s largest shopping centre Fourways Mall in Johannesburg, has collected less than half (49%) of its rentals due for May owing to the impact of the Covid-19 pandemic on commercial and retail tenants.
The JSE-listed fund, which published its full-year results for the year ending 31 March 2020 on Wednesday, noted in a results media statement that it had a higher rental collection rate of 61% during April and June. South Africa was under a “hard-lockdown” in the month of April to curb the spread of Covid-19, while trade restrictions have eased since May and June.
Accelerate did not declare a dividend for the year-end to March, in anticipation of pandemic pressure on its business and the broader economy. However, the group has also said it is unlikely to declare distributions next year as a result of the impact of Covid-19.
The group’s revenue declined to R1.05 billion for the year, compared to R1.19 billion for its 2019 financial year. This saw its operating profit coming in at R670 million, compared to R813 million in 2019.
However, a R1 billion downward fair-value adjustment in its investment properties, effectively saw the fund report a loss.
As at 31 March 2020, Accelerate’s investment property portfolio had a value of R12.6 billion, compared to R12.7 billion in 2019.
“The movement in the value of the portfolio is mainly due to an increase in the external valuation of our offshore assets [and] the Fourways [Mall] equalisation completed to the value of R907 million, [which was] counteracted by sales concluded by the fund of R730 million as well as conservative downward fair value adjustments to the value of R1 billion,” the group noted in its results Sens announcement.
On Covid-19, Accelerate said: “The situation is highly volatile and continually evolving, [but] the fund is working with our tenants to secure long-term income streams, limit vacancies and ensure long term sustainability for all parties involved.”
“The fund does not however expect a significant reduction in long-term rentals streams at our larger retail centres as rentals currently charged to tenants are at or appreciably below market related rentals. Due to the effects of Covid-19 on tenants and cash receivable from tenants, Accelerate will not be paying a final distribution,” it added.
“Based on the current market conditions and the impact it has on the business, it may be unlikely that the company will be able to pay distributions during 2021. The board will however continue to assess the impact Covid-19 has and will keep shareholders informed in this regard,” the group said.
In its results press statement, Accelerate noted: “The successful acquisition of an additional 12.1% of Fourways Mall, for a total 50% ownership of one of Africa’s largest shopping centres, was settled in debt to the amount of R907.8 million, which increased the group’s loan to value [LTV] from 39% in the prior year to 45.5% in the year under review.”
Commenting in the statement, Accelerate CEO Michael Georgiou said: “Liquidity is key during this time, not only to ensure we meet all our obligations as they become due, but also to ensure that we can provide maximum assistance to our tenants.”
He added: “Uncertainty around the extent and duration of the lockdown and any possible future lockdowns make it virtually impossible to measure the short-, medium- and long-term effects that the virus will have on individuals, businesses, society and the economy as a whole.”
Accelerate noted in its statement that in order to maximise liquidity, it has secured facilities with its major funders. Other measures include engagement with government and the SA Revenue Service, as part of the Property Industry Group, to seek relief around VAT and property rates.