Owner of South Africa’s largest shopping mall in serious trouble

Accelerate Property Group, which owns South Africa’s largest shopping centre, Fourways Mall, is in serious financial trouble.

On Tuesday, 25 February 2025, it published a SENS announcement today highlighting a significant credit rating downgrade.

The Accelerate Property Fund stated that its overall long and short-term issuer credit rating was dropped from B(ZA) to C(ZA).

Accelerate Property’s B(ZA) rating indicated that the group had moderate levels of liquidity to pay its obligations.

The downgrade to C(ZA) indicates that the group’s obligations are vulnerable to non-payment, also known as a default.

Accelerate was downgraded due to the increased risk of the company experiencing a near-term default or distressed debt exchange on its short-term debt.

Accelerate further announced that its senior secured long-term notes’ (debt) issue credit rating has been downgraded from BB(ZA)(EL) to CCC+(ZA)(EL).

The BB credit rating indicated that Accelerate had low credit quality levels of obligation creditworthiness on its long-term obligations.

The downgrade to CCC+ indicates that Accelerate’s capacity for timely payment is highly vulnerable relative to other similar issuers.

GCR also put Accelerate Property Fund’s rating watch as Negative, signalling a heightened probability of the credit rating being downgraded or staying the same.

Accelerate Property Fund stated that it was negotiating with its lenders to extend the maturity date of their loan facilities by two years.

This engagement was necessary because Accelerate Property Fund has debt facilities of R1 billion maturing at the end of February 2025 and R1.4 billion maturing on 31 March 2025.

In its last annual report, the company reported having only R22 million of cash on its balance sheet and total current assets of R1.05 billion, primarily accounts receivable.

This and the newly released information indicate that the Accelerate property fund is unlikely to meet these near-maturing debt payments. 

Accelerate Property Group’s troubles

The latest negative news from the Accelerate Property Group followed numerous adverse reports and indication that it was in trouble.

Last year, Accelerate Property Fund delayed publishing its financial results numerous times and even faced removal from the Johannesburg Stock Exchange (JSE).

This delay came amidst Accelerate facing significant financial difficulties at its most valuable asset, Fourways Mall.

Fourways Mall is 50% owned by Accelerate 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 its poor financial performance.

The shopping centre’s 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 declined by over 50% over the last three years.

Protea Capital Management founder and CEO Jean-Pierre Verster previously advised investors to be cautious about Accelerate Property Fund.

He said Accelerate has a colourful history and that the fund is involved with something that always raises red flags – material related-party transactions.

These are transactions between two business parties with a pre-existing relationship that forms more than 10% of the company’s turnover.

Verster said the property fund bought properties from companies owned by its founder, including Fourways Mall.

Verster doesn’t agree with these business practices, which is why he had short positions on the stock in the past.

Red flags were also raised last year when Investec became a major shareholder in Accelerate through an odd series of events.

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.