CAPE TOWN – Accelerate Property Fund, which has a R12.7billion portfolio of 62 properties, said its retail tenants had shown improved turnovers and shopping centre foot counts after the lockdown, but many risks still remained for the property industry.
The group said in a pre-close update yesterday that to mitigate the effects of Covid-19 the fund had as far as possible tied in tenant assistance and Covid-19 relief with the extension of leases and optimising the tenant mix for its properties.
Vacancies had only slightly increased from 10.8percent at March 31 to 11.4percent currently. The weighted average lease expiry remained strong at 5.4 years, with an overall contractual escalation of 7.4percent in place.
Due to limited trading from level 5 to level 2 of the lockdown, the fund had cut costs as much as possible, which, with lower utilities consumption, had resulted in a decreased cost to income ratio of 14.5percent compared with 26.2percent at March 31.
The tenant retention ratio of 84percent was expected to significantly increase in the short term as Covid-19 tenant assistance is finalised.
At Fourways Mall, 87percent of tenants were now open and trading with the likes of Bounce and Ster-Kinekor set to commence trading in October.
The remainder of the tenants would open gradually with the expectation that the majority of tenants will be open and trading by the end of October. Vacancies remained low at under 1percent.
Eden Meander had come into its own with year-on-year double digit growth in both turnovers and trading densities. Trading density for the year to date 2020 was up 9.2percent on the prior year.
All tenants were trading, and the vacancy rate was stable at 4.4percent.
Restaurants at Cedar Square had also reported encouraging growth in turnover figures in August and September. Vacancies at Cedar Square remained stable at 4.8percent.
Accelerate had experienced a “significant recovery” in trading at smaller retail and convenience centres with the relaxation of lockdown measures with multiple new tenant enquiries at centres such as The Buzz and Leaping Frog.
Accelerate had limited exposure to Edcon, being 1.2percent of revenue for Fourways Mall and 1.6percent by revenue for the fund.
The Edgars store in Fourways Mall is regarded as the flagship store for southern Africa.
New leases with Retailability on the Edgars stores in Fourways Mall and Polokwane had been signed.
The Accelerate Europe portfolio of nine big box retail OBI stores (six in Austria and three in Slovakia) had proved resilient during and after the Covid-19 lockdowns in these countries.
Discussions with OBI executives suggested that trading figures for 2020 were still expected to increase from prior year figures, regardless of the lockdown.
All nine stores in Austria and Slovakia were trading and paying full rental post lockdown. The six stores in Austria opened in mid-April and the Slovakian stores in mid-May.
Progress on Accelerate’s balance sheet strengthening initiative included R188million of sales of the R595m of assets held for sale at March 31, the bulk of which was at the deeds office awaiting registration.
Accelerate would not be paying a distribution for the periods ending September 30, 2020, and March 31, 2021, respectively.
The fund was also exploring several options to unlock additional value on existing properties.
Asset disposals to be completed by December, along with the retention of distributions, were expected to reduce loan-to-value by about 4percent. Discussions were under way with funders to diversify the funding base.