Fourways Mall-owner delays financial results

Accelerate Property Fund is delaying the publication of its 2024 financial results. This comes as the fund and its top asset, Fourways Mall, are experiencing significant challenges.

In a SENS announcement released on Thursday, 27 June 2024, the company announced that the release of Accelerate’s financial results for the year ended 31 March 2024 will not take place by 30 June 2024.

It said this is due to “a delay in the finalisation of the audited annual financial statements for the year ended 31 March 2024”.

“It is anticipated the Financial Results will be released by no later than Wednesday, 10 July 2024. Shareholders and noteholders will be kept updated in this regard,” the company said.

According to JSE Listing Requirements, companies are required to release their financial results within three months after the end of their financial year.

Therefore, Accelerate was expected to release its results by the end of June.

A delay in releasing financial results is often seen as a red flag for investors, as it can raise concerns about the company’s financial health or accounting practices.

This is because investors rely on timely and accurate financial information to make informed investment decisions, and a delay can, therefore, create uncertainty and erode investor confidence.

Last year, a similar situation occurred when Sasfin missed its deadline for publishing its financial results.

Like Accelerate, Sasfin announced a delay and set a new date for publication. However, it missed this deadline as well, meaning it faced suspension from the JSE.

Gryphon analyst Casparus Treurnicht told Business Day at the time that missing financial reporting dates is a major concern and “an orange flag at least”.

He warned that, historically, when companies have missed their reporting deadlines, negative news usually unfolded as details about their troubles became clear.

Financial woes

Fourways Mall –  the largest shopping centre in South Africa and Accelerate’s top asset – has been on a financial decline.

Fourways Mall underwent a significant expansion and revamp in 2019, with the aim to solidify its position as South Africa’s largest shopping centre. 

Unfortunately, the plan backfired. The mall now struggles with a high vacancy rate, failing to attract tenants for the additional space. This has led to a downward spiral for the property’s value and the financial health of Accelerate, which owns 50% of the mall.

The mall’s declining rental income per square meter and a significant drop in fair value have significantly impacted the company. 

This negative performance is reflected in Accelerate’s share price, which has plummeted almost 80% since 2019, reflecting investor scepticism about the company’s future.

One major shareholder, Investec, also finds itself in an awkward position.  

Through a loan default, Investec became an involuntary owner of an 8% stake in Accelerate.

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.

While Investec would likely prefer to recoup their loaned funds rather than hold shares in a struggling company, offloading this stake might prove difficult. 

Accelerate’s relatively small market size and Fourways Mall’s ongoing problems make it a challenging prospect for any potential buyer.

Analysts predict a potential tug-of-war.  One scenario suggests Investec might push Accelerate to find a buyer for their unwanted stake. 

However, considering Fourways Mall’s current state, attracting a buyer willing to take on that burden seems unlikely.