South Africa’s biggest shopping mall’s owner in serious trouble – BusinessTech

Accelerate Property Fund (Accelerate), which owns South Africa’s largest shopping centre, Fourways Mall, is facing significant difficulties.

On Tuesday, after the markets closed, it informed shareholders that it had experienced another delay in finalising its audited annual financial statements.

To understand why this poses such a problem, one has to turn back the clock to 27 June 2024, when the first delay hit the company.

It informed shareholders that its financial results for the year ended 31 March 2024 would not be published by the expected date of 30 June 2024.

“It is anticipated the financial results will be released by no later than Wednesday, 10 July 2024,” it said at the time.

However, on 9 July, a day before the deadline, the company informed shareholders that it would not meet the 10 July 2024 deadline as previously indicated.

“It is anticipated the Financial Results will be released during the course of the day on Monday, 15 July 2024,” it said.

However, 15 July came and went without any results from Accelerate Property Fund. This raised concerns among many investors.

On 16 July, after the markets closed, Accelerate released a statement on the JSE Stock Exchange News Service about a further postponement.

“The postponement remains due to a delay in the finalisation of the audited annual financial statements for the year ended 31 March 2024 and the auditors’ sign-off thereon,” it said.

“It is anticipated the Financial Results will be released by no later than 21 July 2024,” Accelerate said.

The Johannesburg Stock Exchange (JSE) took a dim view of the continual delays. On 15 July 2024, it addressed Accelerate’s delay in submitting its financial statements.

It missed the three-month period stipulated in the JSE’s listings requirements to publish its annual financial statements

Accordingly, Accelerate’s listing on the JSE trading system has been annotated with a ‘RE’ to indicate that they have failed to submit their statements timeously.

The JSE added that Accelerate’s listing is under threat of suspension and possible removal from the exchange.

“If Accelerate Property Fund still fails to submit their Annual financial statements on or before 31 July 2024, then their listing may be suspended,” it said.

Accelerate Property Fund in trouble

Accelerate Property Fund faces significant challenges, including problems with its biggest investment, Fourways Mall.

Accelerate Property Fund (APF) owns 50% of Fourways Mall which has been struggling with low rentals and a poor financial performance.

Accelerate Property Fund’s latest results revealed that Fourways Mall’s vacancies increased from 14,349 sqm in March 2023 to 15,109 sqm six months later.

“Management continues to focus on reducing vacancies, with the overall vacancy of 17.0%,” it said.

An analysis of Fourways Mall’s finances shows why the shopping mall is in such deep trouble and needs an intervention.

Following the expansion, Fourways Mall’s gross lettable area (GLA) increased from 61,634 square meters in 2019 to 88,785 square meters.

However, a lot of the additional gross lettable area is standing empty because of the low occupancy rate.

The net rent per square meter declined from R298 in 2020 to R262 in 2023. This decline is devastating to a property owner faced with increasing costs.

Fourways Mall’s fair value declined from R4.8 billion in 2020 to R4.02 billion three years later. This is bad news for the property owners, who are losing money.

Warning from Jean-Pierre Verster

The company’s problems go beyond Fourways Mall. Protea Capital Management founder and CEO Jean-Pierre Verster highlighted some of the issues.

He said the company had a “colourful history” and that the fund is involved with something that always raises red flags – material related-party transactions.

These are transactions between two business parties with a pre-existing relationship that forms more than 10% of the company’s turnover.

Verster said the property fund bought properties from companies owned by its founder, including Fourways Mall.

Verster doesn’t agree with these business practices, which is why he had short positions on the stock in the past.

Red flags were also raised earlier this year when Investec became a major shareholder in Accelerate through an odd series of events.

On 21 May 2024, Accelerate released a SENS announcement that Investec had acquired a beneficial interest in the company’s shares.

The acquisition was pursuant to a lending arrangement and that Investec now owns 8.02% of the company.

Shortly after this announcement, Accelerate announced that its director, Michael Georgiou, sold 107 million of the company’s shares at an average price of 53 cents.

While no additional information was provided on why these shares were sold, it can be assumed that Investec acquired Georgiou’s shares linked to a lending transaction.

In other words, Georgiou defaulted on a loan to Investec, and, as a result, Investec acquired over 8% ownership of Accelerate Property Fund.