Our opinion on the current state of ACCPROP(APF)

Accelerate Property (APF) is a real estate investment trust (REIT) with a portfolio of 56 properties valued at R12.7 billion. These are primarily retail (70%), with the rest consisting of office (15%) and industrial (15%) properties across six South African provinces. Its flagship property, which it co-owns with a 50% stake, is the expanded Fourways Mall, a large-scale retail center spanning 178,000 square meters. This expansion aims to position the mall as a competitor to Sandton City and potentially the largest shopping center in Africa. Additionally, it includes "Kidzania," a children's activity center that had not yet launched operations as of November 2021. Accelerate also owns the Cedar Square complex and adjacent land for development.

The original target date for completion of the Fourways Mall expansion was September 2018, later adjusted to April 2019, and finally opening in August 2019, though the site remains incomplete. Despite aiming to compete with online shopping trends, the project's long-term success remains uncertain, given the global pivot toward e-commerce that has been accelerated by the COVID-19 pandemic.

Accelerate seeks to transform Fourways Mall into a comprehensive business center incorporating office, retail, and entertainment spaces. However, concerns persist over whether this investment will be profitable over the long term. Accelerate acknowledged these risks by selling the Leaping Frog shopping center for R130 million to reduce its debt. The sale price was 7.1% below the book value.

In its results for the six months ending September 30, 2023, Accelerate reported a 5% increase in revenue but a headline loss of 2.08c per share compared to a profit of 17.11c in the prior period. Vacancies were down to 17.7% from 19.9%, yet the loan-to-value (LTV) ratio rose to 47.7% from 42.1%. The net asset value (NAV) also decreased from 500c to 406c per share.

Despite the share trading at a significant discount to its NAV, currently at 69c compared to the NAV of 405c, the REIT's rising debt and a challenging retail environment make it a risky investment. Its ability to recover losses from a R1 billion lawsuit against insurers over COVID-19-related losses at Fourways Mall will significantly impact its future performance.