Mall of Africa versus Fourways Mall

For a South African investor looking to break into the property sector or expand their portfolios, two shopping malls are often mentioned – Fourways Mall, the country’s biggest mall, and Mall of Africa, the busiest mall. 

A Daily Investor analysis showed that, despite having a far larger space, Fourways Mall’s high vacancy rates weigh heavily on the property’s performance, making Mall of Africa a better investment.

Shopping malls are at an interesting intersection between retail and property, making them good assets for diversifying an investor’s portfolio.

There is also no shortage of malls in South Africa. According to Rentech Digital, the total number of shopping malls in South Africa is 3,059.

Despite being the country’s smallest province, Gauteng has a disproportionately high number of these shopping centres, with 1,800 monitored malls.

Generally, South African retail investors can buy a stake in shopping malls through a real estate investment trust (REIT), including Fourways Mall-owner Accelerate and Mall of Africa-owner Attacq.

Daily Investor compared these two malls to see whether size or foot traffic was the most meaningful factor to consider when investing in shopping malls.

Fourways Mall boasts the title of South Africa’s biggest, and, on paper, it is a shopper and investor’s paradise. It has a staggering 178,000 m² of gross lettable area (GLA) and around 437 stores compared to Mall of Africa’s 304.

Valuation also tells us that Fourways Mall is considered far more valuable than Mall of Africa at a valuation of R8.03 billion against Mall of Africa’s R5.79 billion.

However, while Fourways Mall beats Mall of Africa in almost every metric, it fell short on two of the most important metrics for successful shopping malls – trading density and vacancy rates.

Despite its impressive size, Fourways Mall has a far lower trading density at R3,699/m², compared to Mall of Africa’s R4,244/m².

Trading density is a key metric that reveals how much revenue a shopping mall generates per square meter of its leasable space. In other words, it shows how productive the mall’s selling area is.

The vacancy rate of a shopping mall refers to the percentage of leasable space that is currently unoccupied. This crucial metric provides insight into the mall’s overall health and its potential for generating income. 

Fourways Mall has a significantly high vacancy rate of 15.90%, compared to Mall of Africa’s 4.38%.

Therefore, while Fourways Mall has a far larger space than Mall of Africa, it is more unoccupied per square meter.

Below is an overview of who owns South Africa’s biggest and busiest malls.

Fourways Mall

Fourways Mall is 50% owned by Accelerate Property Fund and underwent a major revamp and relaunch in 2019.

While this expansion made Fourways Mall the largest mall in South Africa, it did not help stem the mall’s poor financial performance, as its high and increasing vacancy rates meant a decline in the mall’s net rent per square meter.

This also weighed on Accelerate’s share price, which is down almost 25% over the past six months.

While Accelerate and its shareholders are in a difficult position, the company has outlined its plan to save Fourways Mall.

Earlier this year, Accelerate said it wanted to raise R200 million from its existing shareholders through a rights offer.

The company said it will use this money to pay off debt and reposition its finances, particularly regarding Fourways Mall.

The rights offer will issue 500 million ordinary shares in the authorised share capital of Accelerate for a subscription price of 40 cents per share.

The company previously said it planned to raise up to R300 million but settled on this R200 million rights offer.

However, it remains to be seen whether this rights offer will be enough to address Fourways Mall and Accelerate’s challenges.

The Fourways Mall co-owners have also revealed a new strategy to reestablish it as a top-tier shopping destination.

It includes partnering with Flanagan & Gerard as the strategic asset managers and Moolman Group as the property managers.

The plan is to improve signage for seamless navigation, introduce new tenants, and deploy backup power solutions.

It further wants to improve security through better parking area lighting and upgraded security measures.

The plan also includes optimising traffic flow, enlarging parking bays, and revitalising the surrounding area.

Accelerate’s head of investor relations, Morné Reinders, told Daily Investor that Fourways Mall’s current high vacancy rate of 15.9% does not factor in the following larger new and prospective tenants concluded post-financial year-end.

This includes a Volvo and Chery dealership (3,885 m²), Value & Co (4,102 m²), and Tactical HQ (3,000 m²).

In addition, he said the appointment of Flanagan & Gerard as strategic asset managers to Fourways Mall is expected to reduce vacancies further, with a large focus on 2024’s Christmas trading period.  

Mall of Africa

Mall of Africa is owned by REIT Attacq, which previously owned 80% but now owns the entirety.

Earlier this year, the Competition Commission approved a R1.07 billion deal for Attacq Waterfall Investment Company (AWIC) to buy the remaining 20% of Mall of Africa.

Mall of Africa was developed and co-owned by the Atterbury Property Group. It was a R5-billion development.

In May, the JSE-listed Real Estate Investment Trust (REIT) Attacq announced its subsidiary, AWIC, has acquired the remaining 20% stake in Mall of Africa from the Atterbury Group.

Attacq is a strategic development partner in Waterfall City, and AWIC held an 80% stake in Mall of Africa before the deal.

Attacq’s latest annual report showed that the positive retail trade in Mall of Africa resulted in a 91.6% increase in turnover rental and a 71.4% increase in third-party income.

The company added that Mall of Africa became a preferred destination for exhibitions and advertising.

“A 10.8% growth in rental income for the year was supported by 21 new brands being introduced, 16 store upgrades, and 33 leases renewed,” it said.

In its latest financial results for the six months through December 2023, Attacq reported gross revenue of R1.37 billion – up from R1.12 billion the year before – with attributable profits up to R261.8 million from R198.7 million before.

However, one of the biggest contributors to the company’s profits for the period was a net fair value adjustment of its properties to the tune of R368.9 million.

Fair value adjustments are made to adapt a property’s value to reflect up-to-date market conditions – and are not additional cash flow or investment.

Thus, when discounting this adjustment, among others, to better reflect operations, the group actually posted a headline loss of R23.1 million for the period or a headline loss per share of 3.3 cents – down from R261.4 million or 37.1 cents per share before.

According to Attacq CFO Raj Nana, the company’s full-year results are likely to reflect a stronger performance due to the proceeds from the R2.7 billion transaction with the Government Employees Pension Fund (GEPF), where it acquired 30% of Attacq’s Waterfall Investment Company (AWIC).

“The Waterfall City transaction with the GEPF was used to reduce interest-bearing debt to R5.9 billion (Jun 2023: R8.4 billion), resulting in an improvement in the interest cover ratio to 1.93 times,” Nana said.

However, Nana said the transaction’s impact was only included for the final two months of the six-month reporting period. Thus, it will have a larger impact on the full-year results ending 30 June 2024, when it will be included for 8 of the 12 months.

Biggest versus busiest

Below is an overview of Fourways Mall’s financials compared to Mall of Africa’s. All of the figures below were obtained from Accelerate and Attacq’s latest full-year reports and have been verified by both companies.

MeasureFourways MallMall of Africa
Trading densityR3,699/m²R4,244/m²
Gross lettable area178,202 m² 131,038 m²
ValueR45,275 m²R44,777/m²
Vacancy rate15.90%4.38%
Number of stores437304