Fourways Mall owner in serious trouble with the JSE

The JSE has imposed a public censure and a R500,000 fine on Accelerate Property Fund for failing to obtain the correct shareholder approval for the appointment of an asset manager.

This is a breach of the JSE’s Listings Requirements, specifically paragraph 13.40. Accelerate’s fine will be suspended for three years on the condition that it does not commit a similar breach.

Accelerate is a real estate investment trust (REIT) that has been listed on the JSE since December 2013.

It owns retail and commercial properties across South Africa. One of its most notable holdings is a 50% stake in Fourways Mall, the country’s biggest shopping centre.

For years, Fourways Mall has been struggling with high vacancies and declining rents. It underwent a major expansion in 2019 to address these issues.

This revamp made it the largest mall in South Africa, but did not improve its poor financial performance.

To stem its decline, Accelerate announced in December 2023 that it had appointed Flanagan & Gerard as strategic asset and property managers for Fourways Mall.

Flanagan & Gerard is a property development and investment company that has a strong track record of turning around shopping centres.

Accelerate’s deal with Flanagan & Gerard will last for a period of five years, commencing in January 2024.

Subsequently, Accelerate also appointed the Moolman Group and Luvon Investments under a property, development, and asset management services agreement.

This agreement was subject to the approval of Accelerate shareholders in terms of paragraph 13.40 of the JSE’s Listings Requirements.

This paragraph states that JSE-listed entities cannot enter into an agreement to appoint an asset manager without a majority of the votes cast by Accelerate shareholders.

An agreement also cannot be entered into without providing for the right of security holders to cancel the contract at any time before its expiry date.

This cancellation is subject to a majority of the votes cast by securities holders in favour thereof. This is where Accelerate’s trouble with the JSE began.

JSE explains its decision to censure Accelerate

Accelerate announced the appointment of Flanagan & Gerard, the Moolman Group, and Luvon Investments in December 2023.

In its announcement, the REIT included a statement confirming that it has to comply with paragraph 13.40 of the JSE’s Listings Requirements.

“Accelerate is currently in the process of preparing the circular to its shareholders,” the REIT said. 

“An announcement setting out further details and salient dates and times of the general meeting of shareholders to approve the appointment of Flanagan and Gerard will be released in due course.”

In November 2024, Accelerate announced that the suspensive conditions relating to the appointment of the asset manager had not been fulfilled within the prescribed timeframe.

Therefore, the agreement was of no force and effect. However, after the agreement lapsed, the asset manager remained on site.

The JSE said the asset manager also continues to render services in respect of the Fourways Mall on a month‑to‑month basis.

“The company proceeded to conclude the agreement and permitted the asset manager to commence operations on site with effect from 1 February 2024,” the JSE said.

It said Accelerate did so without obtaining approval from a majority of shareholders and without affording the shareholders the right to cancel the agreement at any time prior to its expiry.

“Accordingly, the JSE found the company to be in breach of the provisions of paragraph 13.40 of the Listings Requirements,” it said.

“Shareholders were not afforded the opportunity to exercise their rights in relation to a fundamental aspect of the company’s operations.”

In addition, since Accelerate continues to retain the asset manager’s services, its non-compliance with the Listings Requirements is still ongoing.

“In this regard, the JSE has instructed the company to forthwith comply with the Listings Requirements,” the bourse said.

For its non-compliance, Accelerate was given a public censure and a R500,000 fine from the JSE.

However, the fine is wholly suspended for three years on the condition that Accelerate is not found to be in breach of similar provisions of the Listings Requirements.