Accelerate negotiates rentals in tough market

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Accelerate negotiates rentals in tough market

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Published Date: 2018-11-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

Accelerate negotiates rentals in tough market

The property fund has trimmed its distribution after investing in its portfolio and paying higher finance costs and property rates.

Accelerate Property Fund says demand from tenants for space at its Fourways Mall is building as the super-regional development nears completion. With the opening set for 25 April 2019, the property fund said rental space at Fourways View and Cedar Square was also in demand.

However, it said it had reduced rentals and provided increased assistance to tenants to keep clients, reduce vacancies and protect its income stream. This had resulted in negative rental reversions of 4% on renewals in the six months to end-September, from positive adjustments of 6.2% in March.

The value of Accelerate's portfolio increased to R12.6 billion at the end of September from R12.3 billion in March and its net asset value rose 2.6% to R8 billion. Vacancies improved to 7.8% from 10.04%. It's lowered its distribution by 5.3% to 27.26c per share, blaming the negative distribution growth on strategic spend and investment on its core portfolio, higher finance costs, unreasonable property rate increases, and the smoothing of a large 'in the money' swap which expires next March.

It said investment on its portfolio had resulted in an increase in its loan-to-value above the targeted 35% level. It's now embarked on a number of projects to reduce gearing, including the sale of some properties.

The fund has focused on acquiring quality defensive properties, rather than high-yielding inferior ones. Acquisitions include Portside, an office building in Cape Town's Foreshore, Citibank's A-grade office in Sandton, the Eden Meander retail convenience centre in George and an offshore retail portfolio backed by a leading DIY retailer. Apart from reducing debt, it plans to continue selling non-core properties and reinvesting the proceeds in the core portfolio to stimulate organic growth in property values.

Its shares rose 4.3% to R3.91 yesterday.





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