The Group’s performance is contextualized against a backdrop of a two-month national lockdown (from 26 March 2020 to 1 June 2020) where most tenants could not trade over the busy Easter period as a result of COVID-19 (or “the pandemic.”)
Commenting on the results, Chief Operating Officer Andrew Costa said:
“Pre-COVID-19 we have spent considerable effort in refinement of our strategy to focus on nodal strength and tenant centricity across our portfolio. This focus has stood us in good stead during the worst of the pandemic, as we maintained a tenant retention ratio of 84%. We managed reversions and vacancies very well in the circumstances.
“We recognize that our success as a business is inextricably linked to that of our tenants. As such we negotiated rental relief packages to the value of approximately R100 million to date. The quid pro quo of these negotiations is locking in longer lease terms and allowing us to rebalance the tenant mix.”
Accelerate reported positive retail rental reversions of 5.1% and stable contractual escalations of 7.3% for the period. The overall portfolio, including offices and industrial, showed a -4.3% reversion in renewed leases and contractual escalations averaging 7.4%, excluding the international portfolio.
Vacancies were well maintained, remaining stable at 11.5% despite the impact of the pandemic. The offshore, single tenanted portfolio continued to act as a hedge for the Group’s local exposure, with zero vacancies and an average lease term extended to 12 years, effective post period end.
“The defensiveness of Fourways as a node and Fourways Mall as a superregional with a diverse offering is underscored by the 7 228m2 of new leases concluded during the pandemic. Vacancies at the mall remain low, at under 1% excluding the head-lease,” commented Accelerate CEO, Michael Georgiou.
Rental collections have improved to 80% in September, up from 71% in August and 65% in July this year as retailers showed improved turnovers and increased shopping centre foot counts were reported.
Revenue decreased from R555 million in the prior comparative six months to R416 million, and operating profit reduced to R232 million from R339 million, mainly as a result of the R100 million rental assistance being granted to tenants and provisions for doubtful debts of R33 million.
As communicated to the market earlier this year, Accelerate’s Board advised that it will retain distributions for this reporting period and the next one ending in March 2021.
In the prior reporting period, Accelerate successfully acquired an additional 12.1% of Fourways Mall, for a total 50% ownership of one of Africa’s largest shopping centres. The acquisition was settled in debt to the amount of R907.8 million, which increased the Group’s loan to value (“LTV”) from 39.0% in the 2019 financial year to 45.5% for the year ended 31 March 2020. During the six months under review, the LTV crept up slightly to 46%, due to rental relief packages to tenants.
The company raised R529 million in the debt market, refinancing or settling short-term debt. These efforts extended the Group’s weighted average debt term to 2.5 years. Interest rate cuts as well as out of the money swaps rolling off reduced overall cost of funding from 7.8% to 7.3%.
“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. Uncertainty around any possible second wave lockdowns make it virtually impossible to measure the short-, medium- and long-term effects that the pandemic will have on individuals, businesses, society and the economy as a whole,” concluded Georgiou.
