Fourways Mall misery

Fourways Mall is experiencing a financial decline, and its owner, Accelerate Property Fund, and its shareholders—including Investec—are feeling the pain.

Fourways Mall is the largest shopping centre in South Africa, with a gross lettable area (GLA) of 178,000 square meters and 350 stores.

However, despite its excellent location and track record, the mall is not performing as well as many hoped following its big revamp, completed in September 2019.

Daily Investor analysed Fourways Mall’s financials since its relaunch in 2019, which revealed a troubling situation for its owner, Accelerate Property Fund.

This analysis showed a decline in the mall’s net rent per square meter, a high vacancy rate, and a big drop in fair value.

The 2019 expansion increased the mall’s GLA from 61,634 square meters to 88,785 square meters. However, much of this additional space is empty because of the mall’s low occupancy rate.

The mall’s net rent per square meter has declined from R298 in 2020 to R262 in 2023. With increased costs, this is a poor situation for any landlord.

Fourways Mall’s fair value declined from R4.8 billion in 2020 to R4.02 billion three years later. Considering the high inflation in recent years, it is a blow to the Accelerate Property Fund.

The high cost of Fourways Mall’s expansion and revamp and the subsequent poor performance have taken its toll on Accelerate’s share price.

The company’s share has declined by over 80% since 2019, which shows investors’ scepticism about the company and its assets.

The charts below provide an overview of Fourways Mall’s financial performance over the past few years.

Shareholder pain

Fourways Mall’s poor financial performance spells upcoming pain for its owner, Accelerate Property Fund, and its shareholders.

Investec is among these shareholders. Through an odd series of events, it became a major shareholder in Accelerate Property Fund.

On 21 May 2024, Accelerate released a SENS announcement that Investec had acquired a beneficial interest in the company’s shares.

It said the acquisition was pursuant to a lending arrangement and that Investec now owns 8.02% of the company.

Shortly after this announcement, Accelerate announced that its director, Michael Georgiou, sold 107 million of the company’s shares at an average price of 53 cents.

While no additional information was provided on why these shares were sold, it can be assumed that Investec acquired Georgiou’s shares linked to a lending transaction.

In other words, Georgiou defaulted on a loan to Investec, and, as a result, Investec acquired over 8% ownership of Accelerate Property Fund.

Protea Capital Management founder and CEO Jean Pierre Verster said it is important to realise that Investec did not buy a stake in Accelerate Property Fund.

“Investec now owns 8% of Accelerate. I am sure they would prefer not to own 8% of Accelerate and rather had their loan repaid,” Verster said.

However, if they do not want this stake in the company, it will be difficult to sell out of their position, as Accelerate Property Fund is a relatively small and illiquid share.

“It will be interesting to see whether Investec will become an activist shareholder to find a block buyer for the shares,” he said.

This, too, will be difficult since this buyer will be buying into the struggling Fourways Mall.

“The Fourways Mall is not well designed and does not attract enough foot traffic. It is the biggest headache in the Accelerate portfolio,” Verster said.

There is a plan

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.

Fourways Mall’s vacancies in photos

The images below show the significant number of vacancies at Fourways Mall.