Jean-Pierre Verster cautions about Accelerate Property Fund

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

Speaking to Business Day TV, he said Accelerate had 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 the founder of the fund, including Fourways Mall.

He said Accelerate had bought so many shares in the Fourways precinct from the founder that it now has to issue a rights offer to fund further operations.

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

To understand what Verster was referring to, you have to go back to 2013, when the Accelerate property fund was founded by Michael Georgiou, the current CEO of the company.

Accelerate Property Fund is a real estate investment trust (REIT) listed on the JSE with a market cap of R1.2 billion.

The company gives investors the opportunity to share in a portfolio of well-established, high-quality properties across South Africa.

Most of Accelerate’s properties are in the retail space, most of which are in Gauteng. 

Accelerate recently released a statement saying that it would be issuing a rights offer to raise R50 million to improve its financial position and enable the repositioning of its Fourways Mall.

Accelerate fund spent R5.4 billion to buy 51 properties from the Fourways precinct, The George Nicholas Trust, and Orthotouch.

At the time of the transaction, Michael Georgiou was the majority shareholder of the Fourways precinct.

Orthotouch was also solely owned and directed by Nic Georgiou – Michael’s father – and the George Nicholas Trust is also directed by Nic Georgiou.

These transactions are material related-party transactions and were disclosed as such upon the JSE pre-listing statement.

To put this in simple terms, Michael Georgiou created Accelerate Property Fund by buying properties from his own personal portfolio and that of family members.

The properties purchased from his father’s portfolio were the same properties related to the collapsed Highveld property syndication which Nic Georgiou sold to investors.

Media reports suggested that many investors, including pensioners, lost billions as part of the Highveld property syndication.

After the collapse of the Highveld syndication, the properties within the syndication were transferred to Orthotouch, a company wholly owned by Nic Georgiou, as part of a business rescue.

There have been allegations and legal action against Michael and Nic Georgiou for concealing and dissipating assets from Orthotouch to the Accelerate fund.

Since the company was listed, transactions amounting to hundreds of millions between Accelerate and the Fourways precinct and other related parties have occurred.

These transactions include payments to Fourways precinct for property management services, additional property acquisitions, and contingent considerations.

Accelerate shares were used to pay Fourways precinct for property it let to Accelerate within 3 years from the property purchase date.

Some investors raised concerns about conflicts of interest within these transactions.

They highlighted that the management of Accelerate is the same persons that use investor funds to buy their own services and property from the Fourways precinct.

The Fourways precinct is owned by Azrapart and Eriologix. Azrapart is wholly owned by Eriologix, which is wholly owned by the Michael family trust.

There have also been material transactions between the Fourways precinct and Azrapart, including a R300 million dispute settlement paid to Azrapart in 2021.

Accelerate Property Fund will list the letters of allocation for the rights offer from 8 February to 21 February 2023, after this, the rights offer shares will be issued on 22 February 2023.

The rights offer issued 71.3 million shares at a price of 70 cents per share.

Daily Investor asked Accelerate Property Fund about Verster’s comments, and the company referred us to its feedback on a Moneyweb article.