JOHANNESBURG – Accelerate, the listed property fund, recorded negative rental reversions on renewals in the half-year to end September as tenants came under increasing pressure in a strained economic environment.
Accelerate chief operating officer Andrew Costa yesterday said that the fund experienced a 4 percent decline in rentals during the period compared to a 6.2 percent increase in the half-year to March 2018. Costa said that Accelerate expected the trend to continue in the short term given the current operating environment.
He said the environment had deteriorated with the economy dipping into a technical recession coupled with the continuous pressure given the weakening of the rand and fuel price hikes.
“The property sector, in particular the retail sector, is struggling due to tough market conditions, lack of consumer spending and increased costs of providing goods and services,” said Costa, adding that there had been little to no improvement in property fundamentals. “Given this economic backdrop, our focus on tenant retention, reduction of vacancies, cost control, and protecting our income stream is imperative.”
Accelerate, which is valued at R3.7 billion, said vacancies declined to 7.8 percent from 10.04 percent in the previous reporting period.
It said the distribution per share would now be 27.26 cents. Accelerate’s investment property portfolio jumped marginally to R12.6bn from R12.3bn in March on the higher external valuation of the fund’s offshore assets, and capital expenditure on existing assets in the local portfolio.
The fund’s debt also increased slightly to R5.41bn in September from R5.15bn in the six months to March, predominantly due to the deterioration of the R/€ exchange rate, and nominal debt raised locally for capex spend and development projects.
Accelerate, focused on the acquisition, development and leasing of properties, said there was an uptick in interest from tenants at its Fourways Mall redevelopment project.
Costa said Pet World, the largest pet store in northern Johannesburg, Westpack Lifestyle were among the new shops at Fourways, which has been a key focus for the fund.
The mall is expected to open its doors on April 25, 2019.
He said the 178 000m2 Fourways Mall would consist of approximately 450 stores. As one of the fastest growing nodes in the country, retail in Fourways and its surrounding catchment area has proven buoyant despite the recessionary macroeconomic environment.
Accelerate shares rose 4.27 percent on the JSE on Monday to close at R3.91.