Wrap Text
Consolidated financial results for the six months ended 30 September 2017
ACCELERATE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration No 2005/015057/06)
JSE code: APF ISIN code: ZAE000185815
(REIT status approved) ("Accelerate" or "the company")
CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017
Property portfolio value of R 11.8 billion (30% year-on-year growth)
Total Portfolio GLA of 637 577 m2
Net asset value growth of 21.3% (year-on-year)
KEY INDICATORS
Indicator 30 September 2017 31 March 2017
Portfolio value R11.8 billion R11.6 billion
GLA 637 577m2 633 494m2
Number of properties 70 69
Net asset value R7.4 billion R7.4 billion
Cost to income ratio 15.3% 16.9%
Weighted average lease expiry (by revenue) 5.3 years 5.6 years
Lease escalations (excluding offshore)* 7.5% 7.8%
Vacancies (net of structural vacancies) 8.4% 6.9%
*6.8% including offshore (31 March 2017: 6.9%).
HIGHLIGHTS FOR THE PERIOD UNDER REVIEW
The South African property market remains challenging reflecting tough trading conditions within a weak economy and
uncertain political landscape. Despite these conditions we are encouraged by steady progress made in our key focus
areas:
1. Enhancing returns on our assets:
The fund follows a nodal strategy whereby it looks to invest in high performing nodes to maximize growth and
efficiencies and continues to extract value from its local portfolio by developing, expanding and renovating its
properties.
These projects include work on the following properties; the Fourways Mall redevelopment, BMW bulk where a
development of 8,400m2 for two motor dealerships has been agreed, Foreshore development (where a mixed use
redevelopment is planned), Eden Meander extension of additional retail of 3,085m2, Fourways View and Citibank
upgrading.
Fourways Mall - The redevelopment remains our focus and is now in its final year with the construction expected to
be completed at the end of 2018. This transformative redevelopment will create a super regional
mall which will anchor the Fund, the Fourways Node and provide a catalyst for future value creation.
Whilst having the "typical" offerings of a super regional, Fourways Mall will proactively differentiate itself by
way of its children's entertainment offering, with amongst others Bounce Fourways (the flagship store in South
Africa - 4 700 m2) and Kidzania, a safe, unique and interactive 'city' built entirely for children, which blends
learning and reality with entertainment (8 000 m2) will anchor this offering within the Mall.
2. Balance sheet management:
We continue to target a LTV of 35% to 40%. Given our recent acquisitions we sit at an elevated LTV. Numerous steps
are being undertaken to reduce leverage. These include:
Ongoing negotiations on a potential BEE deal(sale) with an approximate size of R 1.2 billion;
Recycling of certain assets to the value of approximately R 1 billion;
Sale/joint venture on available bulk; and
Development and sale of residential units at the Cape Town Foreshore.
3. Operations:
Within the current economic environment a focus on tenant retention and protecting our income stream is imperative.
As at 30 September 2017 we have achieved average positive rental reversions of 3.1%, with a tenant retention rate
of approximately 90.1%.
Overall the portfolio continues to perform favourably, cost to income has decreased from 16.9% for full year FY17
to 15.3% YTD("year to date") with some once off costs being incurred in FY 17 in the establishment of our offshore
platform. Arrears have remained constant. Lease escalations are healthy and average approximately 7.5%. The
portfolio WALE("weighted average lease expiry") is still defensive being in excess of 5 years.
Accelerate has seen significant progress in its core office portfolio consisting of 76.7% A and P grade buildings.
Portside Tower - vacancies have reduced from 74.1% at 30 June 2016 to 21.0% at 30 September 2017. Recent increased
letting activity can be attributed to letting smaller boxes whilst still maintaining our target rentals and
escalations. Demand for P-grade green buildings continues to be relatively strong in the Cape
Town CBD and we expect to see this improved letting trend continue.
Citibank - In February 2017, Accelerate acquired the Citibank building in the Sandton CBD. The acquisition
represented an opportunity to purchase an A-grade office building, anchored by Citibank, situated in a prime
location. The property is directly adjacent to Nelson Mandela Square and is 300m from the Sandton Gautrain station.
At acquisition the property was 22.9% vacant (2,593 m2) with an acquisition yield of 5.50% (excl. any vacancy
assumptions). Per the Rode property report, as at March 2017 vacancies in the Sandton area were approximately 13%
for A-Grade offices. Within seven months of acquisition, vacancies have decreased to 5.9% (732 m2) with a WALE of
6 years and a yield of 8.3%.
4. Optimising our funding:
The Fund continues to diversify its funding base, proactively managing its cost of debt and interest rate risk.
During August 2017, we successfully accessed the debt capital markets through our DMTN programme to refinance
R 264 million of DCM("debt capital markets") debt maturing in September 2017. Given demand and attractive pricing
a decision was made to increase the potential take up to R 525 million to re-finance bank debt maturing in December
2017. Ultimately, favourable bids of R 761 million were received. All funds were utilised to refinance maturing
debt. R 325 million of 3-year debt at 189bps and R 200 million five year debt at 214bps above 3 month Jibar was
raised. The weighted average term of debt subsequently increased to 2.5 years. The weighted average cost of debt
for the fund remains at 8.4%. We will continue to actively manage the cost and maturity profile of our debt.
In July 2017, the Fund took out an additional R 400 million 3-year swap as part of our ongoing hedging strategy at
a fixed rate of 6.88%. 82% of debt is hedged with a weighted average swap maturity of 2.1 years.
5. Offshore:
During 2016 Accelerate launched its single-tenant long-term net lease platform.
The fund initiated this strategy with the acquisition of a portfolio of nine well-located retail properties in
Austria and Slovakia tenanted by OBI the largest DIY retailer in Central and Eastern Europe. The properties were
recently independently valued in June 2017 at EUR 89.2 million resulting in an 8.7% increase post acquisition.
FINANCIAL POSITION
As at 30 September 2017, Accelerate's investment property portfolio had a value of R11,8 billion
(31 March 2017:11.6 billion), excluding the effects of straight-lining. The uptick in the value of the portfolio
is due to an increase in the external valuation of our offshore assets, capex spend on existing assets in our local
portfolio and the acquisition of Brooklyn Place in Charles Crescent, which forms part of another long term
strategic plan for Accelerate.
Accelerate's total debt increased from R 4.9 billion at 31 March 2017 to R 5.2 billion at 30 September 2017,
predominantly due to the deterioration of the Rand-Euro exchange rate as well as nominal debt raised locally for
capex spend and expansion projects.
Long-term debt allocation - 30 September 2017
Bank funding - SA portfolio 30 September 2017 31 March 2017
(Rm) (Rm)
Debt capital markets 1 487 28.6% 1 226 25.1%
Bank funding 3 716 71.4% 3 654 74.9%
Total 5 203 100.0% 4 880 100.0%
Weighted average debt term (years) 2.5 2.3
Short-term portion of debt* 1 077.0 20.7% 992.0 20.3%
Debt hedged 4 281 82.3% 3 805 78.0%
Weighted average swap term (years) 2.1 2.4
Blended interest rate 8.4% 8.4%
Interest cover ratio (x) 2.4 2.6
Loan to value 42.8% 41.9%
*R 275 million of this debt has been refinanced post 30 September 2017. The next debt expiring is in May 2018.
FINANCIAL PERFORMANCE
The underlying fundamentals of Accelerate's core South African retail portfolio remain solid during difficult
economic times. Strategic spend and investment in our core assets such as Fourways Mall where we are introducing a
revolutionary children's education and entertainment concept, Kidzania, positions the fund favourably for the future.
Distribution per share for the period equates to 28.777 cents (2016: 28.766 cents). Refer to the distribution
analysis for more detail.
Accelerate's gross rental income figure has increased to R 606 million (excluding straight-line rental revenue adjustment)
for the period (2016: R 498 million). This was driven by acquisitions such as Eden Meander, Citi Bank,
Murray & Roberts and our Offshore OBI portfolio. Accelerate has also remained focused on tenanting and
maximising returns from the core portfolio.
The net property expenses of R47.2 million (2016: R 27.7 million), in conjunction with R 26.6 million in other
operating costs (2016: R26.4 million), resulted in Accelerate achieving a 15.3% cost-to-income ratio
(2016: 13.96%) for the six month period.
Distributions per share is used as a performance measure for trading statement purposes.
Consolidated Statement of financial position 30 September 2017 31 March 2017
(R'000) (R'000)
ASSETS
Non-current assets 12 082 353 11 900 199
Investment property 1 12 080 925 11 860 689
Derivative financial assets 2 - 38 134
Property plant and equipment 1 428 1 376
Current assets 564 972 483 688
Current tax receivable 9 269 9 881
Trade and other receivables 2 441 467 340 189
Cash and cash equivalents 2 114 236 133 618
Investment property held for sale 100 450 -
Non-current assets held for sale 1 100 450 -
Total assets 12 747 775 12 383 887
EQUITY AND LIABILITIES
Equity 7 352 414 7 352 992
Ordinary share capital 5 092 861 5 156 011
Other reserves 26 434 52 944
Non-controlling interest 15 102 12 421
Retained income 2 218 017 2 131 616
Total equity 7 352 414 7 352 992
Non-current liabilities 4 151 299 3 887 257
Borrowings 2 4 124 940 3 887 257
Derivative financial liabilities 2 26 359 -
Current liabilities 1 244 062 1 143 638
Trade and other payables 2 167 062 151 619
Borrowings 2 1 077 000 992 019
Total equity and liabilities 12 747 775 12 383 887
Consolidated Statement of comprehensive income For the six months For the six months
ended ended
30 September 2017 30 September 2016
(R'000) (R'000)
Revenue, excluding straight-line rental revenue adjustment 606 305 498 042
Straight-line rental revenue adjustment 26 921 16 027
Revenue 633 226 514 069
Property expenses (169 024) (138 407)
Net property income 464 202 375 662
Operating expenses (26 689) (26 441)
Operating profit 437 513 349 221
Fair value adjustments 4 (54 699) (39 145)
Unrealised foreign exchange gains 81 213 -
Other income 648 620
Gain on non-current assets held for sale or disposal groups - 5 931
Finance income 36 345 16 870
Profit before long-term debt interest and taxation 501 020 333 497
Finance costs (180 155) (139 314)
Profit before taxation 320 865 194 183
Taxation (883) -
Profit for the period 319 982 194 183
Other comprehensive income that may be reclassified to
profit and loss in subsequent periods
Exchange differences on translation of foreign operations 4 907 -
Total comprehensive income 324 889 194 183
Profit attributable to:
Shareholders of the parent 318 813 194 183
Non-controlling interest 1 169 -
EARNINGS PER SHARE
Basic earnings per share (cents) 33.21 23.36
Diluted earnings per share (cents) 32.74 23.05
DISTRIBUTABLE EARNINGS
Profit after taxation attributable to equity holders 318 813 194 183
Less: straight-line rental revenue adjustment (26 921) (16 027)
Less: unrealised foreign exchange gains (81 213) -
Add: fair value adjustments 55 358 39 145
Add: distribution from reserves - 15 298
Distributable earnings 266 037 232 599
Distribution per share (cents) 28.777 28.766
Consolidated Statement of changes in equity Total
Foreign attributable
currency to equity Non con-
translation Other Share Retained holders of trolling Total
reserve Reserves Capital Income group interest Equity
(R'000) (R'000) (R'000) (R'000) (R'000) (R'000) (R'000)
Balance at 1 April 2016 - 20 045 4 105 211 1 646 710 5 771 966 - 5 771 966
Total Comprehensive income
attributable to equity holders - - - 194 183 194 183 - 194 183
Issue of shares - - 327 944 - 327 944 - 327 944
Distribution paid - (13 924) - (189 295) (203 219) - (203 219)
Conditional share plan reserve - 2 294 - - 2 294 - 2 294
Antecedent distribution reserve* - 12 390 - - 12 390 - 12 390
Total contributions by and
distributions to owners of company
recognised directly in equity - 760 327 944 (189 295) 139 409 - 139 409
Balance at 30 September 2016 - 20 805 4 433 155 1 651 598 6 105 558 - 6 105 558
Consolidated Statement of changes in equity Total
Foreign attributable
currency to equity Non con-
translation Other Share Shares re- Retained holders of trolling Total
reserve Reserves Capital purchased Income group interest Equity
(R'000) (R'000) (R'000) (R'000) (R'000) (R'000) (R'000) (R'000)
Balance at 1 April 2017 (1 439) 54 383 5 156 011 - 2 131 616 7 340 571 12 421 7 352 992
Profit for the period 318 813 318 813 1 169 319 982
Other comprehensive income 3 395 - - - - 3 395 1 512 4 907
Total Comprehensive income
for the period 3 395 - - - 318 813 322 208 2 681 324 889
Issue/(repurchase) of shares - - - (63 150) - (63 150) - (63 150)
Distribution paid - (36 999) - - (232 412) (269 411) - (269 411)
Conditional share plan reserve - 7 094 - - - 7 094 - 7 094
Total contributions by and
distributions to owners of
company recognised directly
in equity - (29 905) - (63 150) (232 412) (325 467) - (325 467)
Balance at 30 September 2017 1 956 24 478 5 156 011 (63 150) 2 218 017 7 337 312 15 102 7 352 414
*This reserve relates to the antecedent distribution portion of the capital raised.
Consolidated Statement of cash flows For the six months For the six months
ended ended
30 September 2017 30 September 2016
(R'000) (R'000)
Cash flows from operating activities
Cash generated from operations 261 688 258 165
Distribution paid (232 412) (203 219)
Finance income 36 345 16 870
Tax paid (271) (2 471)
Net cash from operating activities 65 350 69 345
Cash flows from investing activities
Purchase of property, plant and equipment (206) (525)
Purchase of investment property/Capitalised cost (126 886) (839 130)
Proceeds from disposal of investment property - 93 000
Net cash from investing activities (127 092) (746 655)
Cash flows from financing activities
Proceeds on share issue - 241 976
New long-term borrowings 847 664 942 000
Settled long-term borrowings (525 000) (228 245)
Repurchase of shares (63 150) -
Finance costs (180 155) (139 314)
Antecedent distribution (36 999) -
Dividend reinvestments - 98 359
Net cash from financing activities 42 360 914 776
Total Cash movement for the period (19 382) 237 466
Cash at the beginning of the period 133 618 71 428
Total cash at end of the period 114 236 308 894
Distribution Analysis For the six months For the six months
ended ended
30 September 2017 30 September 2016
(R'000) (R'000)
Distributable earnings 266 037 232 599
Shares qualifying for distribution
Number of shares at period end 986 372 706 859 652 330
Less: Bulk ceded shares to Accelerate* (51 070 184) (51 070 184)
Less: Shares repurchased by Accelerate (10 828 803) -
Shares qualifying for distribution 924 473 719 808 582 146
Interim distribution per share (cents) 28.77713 28.76627
*The cession on these shares relate to bulk in the Fourways area acquired by Accelerate at listing, these shares
will only be eligible for dividends at the earlier of the development of the bulk or December 2021.
Earnings per share For the six months For the six months
ended ended
30 September 2017 30 September 2016
(R'000) (R'000)
Basic earnings per share (EPS) amounts are calculated by dividing profit
for the period attributable to ordinary equity holders of Accelerate by the
weighted average number of ordinary shares outstanding during the period.
Reconciliation of basic/diluted earnings to headline earnings
Total profit after tax 318 813 194 183
Fair value adjustment on Investment property (9 134) -
Gain on sale of non-current assets held for sale - (5 931)
Headline profit attributable to shareholders 309 679 188 252
Basic earnings per share (cents) 33.21 23.36
Diluted earnings per share (cents) 32.74 23.05
Headline earnings per share (cents) 32.26 22.65
Diluted headline earnings per share (cents) 31.80 22.35
Shares in issue at the end of the period 986 372 706 859 652 330
Weighted average number of shares in issue 960 010 924 831 127 185
Dilutionary Instruments
Shares subject to the deferred acquisition costs - 4 295 396
Shares subject to the conditional share plan 13 818 819 6 851 733
Weighted average number of dilutionary instruments 13 818 819 11 147 129
Total diluted weighted average number of shares in issue 973 829 743 842 274 314
SEGMENTAL ANALYSIS
The individual properties are aggregated into segments with similar economic characteristics such as nature of the
property and the occupier market it serves. Management considers that this is best achieved by aggregating
properties into office, industrial, retail and European retail.
Consequently, the company is considered to have four reportable operating segments, as follows:
- Office segment: acquires, develops and leases offices;
- Industrial segment: acquires, develops and leases warehouses and factories;
- Retail segment: acquires, develops and leases shopping malls, community centres as well as retail centres;
- European single tenant segment: acquires, develops and leases single tenant space backed by long term leases.
Group administrative costs, profit/loss on disposal of investment property, finance revenue, finance costs, income
taxes and segment liabilities are not reported on a segmented basis.
There are no sales between segments.
Period ended 30 September 2016 (6 months)
European
R'000s Office Industrial Retail Retail Total
Statement of comprehensive income
Revenue, excluding straight-line rental revenue adjustment 132 374 32 864 332 804 - 498 042
Straight-line rental adjustment 7 891 1 873 6 263 - 16 027
Property expenses (34 806) (5 118) (98 483) - (138 407)
Segment operating profit 105 459 29 619 240 584 - 375 662
Other operating expenses (26 441)
Other income 6 551
Fair value gains/(losses) (39 145)
Finance income 16 870
Long term debt interest (139 314)
Profit before tax 194 183
Period ended 30 September 2017 (6 months)
European
R'000 Office Industrial Retail Retail Total
Statement of comprehensive income
Revenue, excluding straight-line rental revenue adjustment 176 605 35 275 361 012 33 413 606 305
Straight-line rental adjustment 16 432 1 017 9 472 - 26 921
Property expenses (39 683) (5 482) (115 142) (8 717) (169 024)
Segment operating profit 153 354 30 810 255 342 24 696 464 202
Other operating expenses (26 689)
Unrealised foreign currency gains/(losses) 81 213
Other income 648
Fair value gains/(losses) (54 699)
Finance income 36 345
Long term debt interest (180 155)
Profit before tax 320 865
For the year ended 31 March 2017
European
R'000 Office Industrial Retail Retail Total
Statement of financial position extracts at 31 March 2017
Assets
Investment property balance 1 April 2016 1,942,277 637,996 5,973,229 - 8,553,502
Acquisitions 1,180,000 - 365,000 1,166,560 2,711,560
Capital expenditure 46,445 5,917 144,922 42,696 239,980
Disposals/ classified as held for sale - - (185,726) - (185,726)
Investment property held for sale -
Straight-line rental revenue adjustment 21,685 3,043 12,230 - 36,958
Fair value adjustments 86,143 3,585 372,233 42,454 504,415
Segment assets at 31 March 2017 3,276,550 650,541 6,681,888 1,251,710 11,860,689
Other assets not managed on a segmental basis
Derivative financial instruments 38,134
Equipment 1,376
Current Assets 483,688
Total Assets 12,383,887
For the period ended 30 September 2017
European
R'000 Office Industrial Retail Retail Total
Statement of financial position extracts at 30 September 2017
Assets
Investment property balance 1 April 2017 3,276,550 650,541 6,681,888 1,251,710 11,860,689
Acquisitions 48 000 - - - 48 000
Capital expenditure 7 556 367 60 816 - 68 739
Disposals/classified as held for sale - - (100 450) - (100 450)
Investment property held for sale - - 100 450 - 100 450
Foreign exchange gains - - - 167 233 167 233
Straight-line rental revenue adjustment 16 432 1 017 9 472 - 26 921
Fair value adjustments - - - 9 793 9 793
Segment assets at 30 September 2017 3 348 538 651 925 6 752 176 1 428 736 12 181 375
Other assets not managed on a segmental basis
Equipment 1 428
Current Assets 564 972
Total Assets 12 747 775
NOTES TO THE FINANCIAL STATEMENTS
CORPORATE INFORMATION
The condensed financial statements of Accelerate for the period ended 30 September 2017 were authorised for issue
in accordance with a resolution of the directors passed on the 17th of November 2017. Accelerate is a public
company incorporated and domiciled in South Africa whose shares are publicly traded on the JSE. The registered
office is located at Cedar Square Shopping Centre, corner Cedar Road and Willow Avenue, Fourways ,Johannesburg.
The principal activities of Accelerate are the acquisition, development and leasing of properties. The functional
and presentation currency of Accelerate is South African Rand. All figures are rounded off to R'000 except where
otherwise stated.
BASIS OF PREPARATION
These condensed financial statements for the period ended 30 September 2017 are prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS), contains the minimum information required by IAS 34 Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued
by Financial Reporting Standards Council, the requirements of the Companies Act, 71 of 2008, as amended and the
JSE Listings Requirements.
The accounting policies applied in the preparation of these condensed financial statements are in terms of IFRS and
are consistent with those applied in the previous financial period, except for the new and amended IFRSs that
became effective during the 30 September 2017 reporting period, none of which had any material impact on
Accelerate's financial result.
These condensed financial statements have been prepared under the historical cost convention except for investment
properties which are measured at fair value.
The fair value of investment properties is determined by directors with reference to market-related information
while other financial liabilities are valued with reference to market-related information and valuations as
appropriate. All investment properties are valued by independent external valuers on a 3-year rolling cycle.
These condensed financial statements were prepared under the supervision of Mr Dimitri Kyriakides (CA)SA in his
capacity as Chief Financial Officer.
EXPECTED IMPACT OF IFRS 9, 15 AND 16
Standards issued but not yet effective
The following standards all become effective on 1 January 2018. Accelerate intends to adopt these standards
when they become effective.
- IFRS 9 Financial instruments
Accelerate has considered the possible impact the implementation of IFRS 9 will have on the presentation and
disclosure of its annual financial statements:
- Hedge accounting
Accelerate does not apply hedge accounting, thus the changes in IFRS 9 relating to hedge accounting will not
have an impact.
- Trade receivables
Accelerate currently evaluates the possible credit loss per tenant on a case by case basis and
provides for the possible loss in the annual financial statements. This assessment is re-evaluated on an
ongoing basis and the provision adjusted. We are of the opinion that this method of accounting will
remain materially the same after the implementation of IFRS 9.
- IFRS 15 Revenue from contracts with customer
Accelerate has considered its revenue streams from customers and the possible impact IFRS 15 will have on the
presentation and disclosure of the financial statements. It is not expected that the adoption of IFRS 15 will
have any impact on the presentation and disclosure of Accelerates financial statements.
- IFRS 16 Leases
Accelerate is not party to any material lease contracts as a lessee. Due to the nature of Accelerates business
being the rental of office, retail and industrial space to tenants Accelerate does act as a lessor in lease
contracts with tenants. Lessor accounting will remain substantially unchanged from current accounting under
IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and
distinguish between two types of leases: operating and finance leases.
1. FAIR VALUE MEASUREMENT OF INVESTMENT PROPERTIES
Levels of fair value measurements
It is the policy of Accelerate to have every property valued by an external valuer on a three-year rotational basis
as required by the JSE Listings Requirements. Accelerate's properties are only revalued once a year at its 31 March
year end. This means that each property Accelerate holds is independently valued at least every three years. The
remaining investment properties held at the end of each reporting period are valued by Accelerate's directors.
Each year the directors appoint external valuers who are responsible for the external valuations of property for
the annual financial statements. Selection criteria include market knowledge, reputation, independence and whether
professional standards are maintained. Valuations for properties not externally valued are performed internally by
the directors. Internal methods are aligned with those used by external valuers.
At each valuation date, the directors analyse the movement in each property's value. For this analysis, the
directors verify the major inputs applied in the latest valuation by agreeing the information in the valuation
computation to contracts (e.g., rent amounts in rental contracts), by comparing market reports (e.g., market rent,
cap rates in property market reports) and other relevant documents. Each property is considered a separate asset
class based on the unique nature, characteristics and risks of the property. The directors compare each property's
change in fair value with relevant external sources (such as the investment property database or other relevant
benchmarks) to determine whether the change is reasonable.
The directors have presented the valuation results at 31 March 2017 to Accelerate's independent auditors. This
includes the major assumptions used in the valuations, with an emphasis on property with fair value changes outside
of the relevant thresholds.
Valuation techniques
The fair values of investment properties are determined using either a discounted cash flow (DCF) method or income
capitalisation method (cap rate).
Discounted cash flow method
Under the DCF method, a property's fair value is estimated using explicit assumptions regarding the benefits and
liabilities of ownership over the asset's life including an exit or terminal value. As an accepted method within
the income approach to valuation, the DCF method involves the projection of a series of cash flows on a real
property interest. To this projected cash flow series, an appropriate, market-derived discount rate is applied to
establish the present value of the cash inflows associated with the real property. The duration of the cash flow
and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and
related lease periods, re-letting, redevelopment or refurbishment. The appropriate duration is typically driven by
market behaviour that is a characteristic of the class of real property. In the case of investment properties,
periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection
losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses.
The series of periodic net cash inflows, along with an estimate of the terminal value anticipated at the end of the
projection period, is then discounted.
Income capitalization method
Under the cap rate method, a property's fair value is estimated based on the normalised net operating income
generated by the property, which is divided by the capitalisation (discount) rate. The difference between gross and
net rental income includes the same expense categories as those for the DCF method with the exception that certain
expenses are not measured over time, but included on the basis of a time weighted average, such as the average
lease costs. Under the cap rate method, over and under-rent situations are separately capitalised/(discounted).
The external valuations at 31 March 2017 were performed by Mills Fitchet (TVL) Pty Ltd an accredited independent
valuer with a recognised and relevant professional qualification and with recent experience in the locations and
categories of the investment property being valued. The internal valuations were performed by the directors. The
valuation models applied are in accordance with those recommended by the International Valuation Standards
Committee and are consistent with the principles in IFRS 13.
The movement in Accelerate's investment property balance from 31 March 2017 to 30 September 2017 is only due to
acquisitions and disposals during the period. None of the properties held at 31 March 2017 have been revalued
(except for the 9 offshore properties) for the period ended 30 September 2017 and new properties acquired were
recognized in the books of Accelerate at their purchase price which the directors deem to be the fair value of the
property at the date of acquisition.
The directors have assessed the changes in market conditions and inputs to the valuations performed at 31 March 2017
and have deemed the valuations performed at 31 March 2017 to still be applicable at 30 September 2017.
For the most recent valuations performed, the portfolio had the following vacancy rates, calculated based on vacant
area to total GLA along with the following estimates of when actual vacancy will equal the long-term rate:
Fair value as
30 September 2017
(excluding
straight-lining Long term Estimated period
Class of property reserve) Current vacancies vacancies of cenvergence
Office 3,230,105 0% - 100% 5% - 15% 2.5 years
Industrial 692,621 0% 2% - 5% n/a
Retail 6,502,070 0% - 84.8% 5% - 10% 2 years
European retail 1,428,736 0% 0% n/a
Total 11,853,532
The R 11,853,532,000 includes the held for sale assets and excludes the straight lining and unamortised leasing
commission.
Changes in valuation techniques
There were no changes in valuation techniques during the period.
Highest and best use
For all investment property that is measured at fair value, the current use of the property is considered the
highest and best use.
Valuation techniques and inputs derive level 3 fair values
The table below presents the following for each class of the investment property:
- The fair value measurements at the end of the reporting period.
- A description of the valuation techniques applied.
- The inputs used in the fair value measurement, including the ranges of rent charged to different units within
the same building.
- Quantitative information about the significant unobservable inputs used in the fair value measurement.
Fair value as
30 September 2017
(excluding Key
straight-lining Valuation unobservable
Class of property reserve) technique inputs Ranges
Office 3,230,105 Income capitalisation * ERV *R36.00 - R222.00
*Rental growth p.a. *7.7%
*Long-term vacancy rate *5% - 10%
Industrial 692,621 Income capitalisation * ERV *R34.00 - R136.00
*Rental growth p.a. *7.7%
*Long-term vacancy rate *0%
Retail 6,502,070 Income capitalisation * ERV *R43.00 - R212.00
*Rental growth p.a. *7.8%
*Long-term vacancy rate *5% - 10%
European retail 1,428,736 Income capitalisation * ERV *R64.00 - R182.00
*Rental growth p.a. *0%
*Long-term vacancy rate *0%
11,853,532
Descriptions and definitions
The above table includes the following descriptions and definitions relating or valuation techniques and key
unobservable inputs made in determining the fair values.
Estimated rental value (ERV)
The rent at which space could be let in the market conditions prevailing at the date of valuation.
Rental growth
The estimated average increase in rent based on both market estimations and contractual indexations.
Long-term vacancy rate
The equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise
to ERV at the next review, but with no further rental growth.
Sensitivity analysis to significant changes in unobservable inputs within level 3 of the hierarchy.
The significant unobservable inputs used in the fair value measurement categorised within level 3 of the fair value
hierarchy of the entity's portfolios of investment property are:
ERV
- Rental growth
- Long-term vacancy rate
- Discount rate/yield.
Significant increases/(decreases) in the ERV (per sqm p.a.) and rental growth p.a. in isolation would result in a
significantly higher/(lower) fair value measurement. Significant increases/(decreases) in the long-term vacancy
rate and discount rate (and exit or yield) in isolation would result in a significantly lower/(higher) fair value
measurement. Generally, a change in the assumption made for the ERV (per sqm p.a.) is accompanied by:
- a similar change in the rent growth p.a. and discount rate (and exit yield); and
- an opposite change in the long-term vacancy rate.
Across the portfolio of properties held, it was determined that if the equivalent yield applied per property
increases/(decreases) by 50 basis points, the overall value of the portfolio will decrease by 6.3% if the
equivalent yield is increased, and increase by 7.2% if the equivalent yield is decreased.
2. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
31 MARCH 2017
Carried at fair value Amortised cost# Total
Financial assets R'000 R'000 R'000
Derivative financial assets* 38 134 - 38 134
Trade and other receivables - 340 189 340 189
Cash and cash equivalents - 133 618 133 618
Total financial assets 38 134 473 807 511 941
Financial liabilities
Long-term interest-bearing borrowings (3 887 257) (3 887 257)
Trade and other payables (137 324) (137 324)
Current portion of long-term debt (992 019) (992 019)
Total liabilities (5 016 600) (5 016 600)
30 September 2017
Carried at fair value Amortised cost# Total
Financial assets R'000 R'000 R'000
Trade and other receivables - 441 467 441 467
Cash and cash equivalents - 114 236 114 236
Total financial assets - 555 703 555 703
Financial liabilities
Derivative financial liabilities* (26 359) - (26 359)
Long-term interest-bearing borrowings (4 124 940) (4 124 940)
Trade and other payables (152 998) (152 998)
Current portion of long-term debt (1 077 000) (1 077 000)
Total liabilities (26 359) (5 354 938) (5 381 297)
*The values of the derivative financial asset shown at fair value are based on inputs other than quoted prices that are
observable in the market for the assets and liabilities, either directly (i.e. as prices) or indirectly (i.e. derived
from prices) - level 2. The value of the swaps is determined as the discounted value of the future cash flows to be
paid or received from the swap assets. For the valuation current JIBAR was used as an indication of future JIBAR.
#The carrying value of financial assets and liabilities carried at amortised cost is considered to approximate the
fair value of those financial assets and liabilities. There have been no significant changes in valuation
techniques or transfers between fair value hierarchy levels.
3. RELATED-PARTY TRANSACTION AND BALANCES
Relationships
M Georgiou and A Costa are directors of both Accelerate Property Fund Ltd and Accelerate Property Management
Company (Pty) Ltd. Both directors' full remuneration is paid by Accelerate Property Fund. M Georgiou own 100% of
Fourways Precinct (Pty) Ltd through The Michael Family Trust and also owns 100% of Accelerate Property Management
Company (Pty) Ltd.
At 30 September 2017 At 31 March 2017
R'000 R'000
Related party balances
The Michael Family Trust 60 607 55 602
Fourways Precinct (Pty) Ltd 27 622 11 458
Vacancy guarantee
Fourways Precinct (Pty) Ltd 16 472 15 921
Development guarantee
Fourways Precinct (Pty) Ltd 69 493 39 288
For the 6 months ended For the 6 months ended
30 September 2017 30 September 2016
Related party transactions R'000 R'000
Vacancy guarantee
Fourways Precinct (Pty) Ltd - 5 259
Development guarantee
Fourways Precinct (Pty) Ltd 25 721 13 970
Interest charged
Interest charged on outstanding amounts:
Fourways Precinct (Pty) Ltd 3 165 -
The Michael Family Trust 1 910 6 335
Accelerate Property Management costs
Fourways Precinct (Pty) Ltd (1 906) (2 475)
Accelerate Property Management Company (Pty) Ltd (3 744) (2 387)
Letting commission
Fourways Precinct (Pty) Ltd (3 282) -
4. FAIR VALUE ADJUSTMENTS
For the 6 month period For the 6 month period
ended 30 September 2017 ended 30 September 2016
Fair value adjustments R'000 R'000
Fair value gain on investment property 9 793
Mark to market movement on swaps (64 492) (39 145)
(54 699) (39 145)
5. ECONOMIC HEDGES
Interest rate swaps
Accelerate holds interest rate swap contracts with notional amounts of R 3 600 000 000 (31 March 2017: R 3 200 000 000),
whereby it pays a fixed rate of interest and receives a variable rate based on one/three month Jibar on the
notional amount. The swap is used to hedge exposure to the variable interest rate payments on the variable rate
secured loans.
The interest rate swaps have been used to match the critical terms of the underlying debt to achieve economic
hedging (hedge accounting has not been applied for accounting purposes). Cash flows are expected to occur until
August 2020 and will be recognised through profit or loss as and when incurred.
The aggregate fair value of the interest rate swaps at the end of the reporting period is - R 8 451 911
(31 March 2017: R17 685 301).
The valuation techniques applied to fair value the derivatives which include the swap models, use present value
calculations. The model incorporates various inputs including the credit quality of counterparties and forward
rates. All derivative contracts are fully cash-collateralised, thereby eliminating both counterparty and
Accelerate's own non-performance risk. The derivatives are classified in level 2 of the fair value hierarchy.
Cross currency swaps
Accelerate also holds a cross currency swap with a nominal value of EUR 21 000 000 (2016: R nil) to hedge exchange
rate movements in euro denominated debt. The cross currency swap matures in January 2020.
The fair value of the cross currency swaps at the end of the reporting period was - R 17 906 679
(31 March 2017: R 20 448 667).
6. CAPITAL COMMITMENTS
In terms of Accelerate's budgeting process, R111.1 million was allocated to Accelerate's planned capital
expenditure. As such, Accelerate views this amount as authorised and not contracted.
7. FINANCIAL GUARANTEE
During December 2016 an executive buy in structure was initiated in order to ensure that the executive directors
of Accelerate are adequately incentivised and aligned with interests of the company and its shareholders in the
long term. SPV's funded through bank debt from RMB can acquire shares up to a maximum of R 205 million in
Accelerate at market related share prices. The interest on bank debt in the SPV's will be serviced by the
distributions received from APF. RMB will have cession over these shares and the directors will only have an
unconditional right to the shares in the SPV's once the bank debt has been settled. Accelerate guarantees to RMB
the performance of each SPV of its obligation. The maximum liability Accelerate may currently have under the
guarantees is the equivalent of 65.0% of the total drawn commitment to the extent that losses incurred by RMB are
not settled by the sale of the shares RMB has cession over. At 30 September 2017 R 202 million of the RMB
facility has been drawn down. At 30 September 2017 a liability of R 8 437 500 was recognised for this guarantee
provided.
8. SUBSEQUENT EVENTS
Non-Adjusting events after 30 September 2017
During October and November 2017 Tyger Manor retail centre was sold for R 59 million and Eden Terrace centre for
R38.5 million as part of the disposal of non-core properties by Accelerate.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors of Accelerate assume full responsibility for the preparation of the condensed financial statements.
FINAL DISTRIBUTION
The board of Accelerate has declared a final cash distribution (number 8) ("Cash Distribution") of 28.77713 cents
per ordinary share (2016: 28.76627 cents per ordinary share) for the period ended 30 September 2017.
The source of the distribution comprises predominantly net income from property rentals earned from the company's
property investments as well as interest earned on excess cash on deposit. Please refer to the condensed statement
of comprehensive income for further details.
A dividend withholding tax of 20% will be applicable on the dividend portion to all shareholders who are not exempt.
The issued share capital at the declaration date is 986 372 706 ordinary shares. The company's income tax reference
number is: 9868626145
Tax implications for South African resident shareholders
Accelerate was granted REIT status by the JSE with effect from 12 December 2013 in line with the REIT structure as
provided for in the Income Tax Act, No. 58 of 1962, as amended (the Income Tax Act) and section 13 of the JSE
Listings Requirements.
The REIT structure is a tax regime that allows a REIT to deduct qualifying distributions paid to investors in
determining its taxable income.
The Cash Distribution of 28.77713 cents per ordinary share meets the requirements of a "qualifying distribution"
for the purposes of section 25BB of the Income Tax Act (a qualifying distribution). Accordingly, qualifying
distributions received by local tax resident shareholders must be included in the gross income of such shareholders
(as a non-exempt dividend in terms of section 10(1)(k)(aa) of the Income Tax Act), with the effect that the
qualifying distribution is taxable as income in the hands of the Accelerate shareholder. These qualifying
distributions are, however, exempt from dividend withholding tax in the hands of South African tax resident
shareholders, provided that the South African resident shareholders have provided the following forms to their CSDP
or broker, as the case may be, in respect of uncertificated ordinary shares, or the transfer secretaries, in
respect of certificated ordinary shares:
- a declaration that the distribution is exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or transfer secretaries, as the case may be, should the
circumstances affecting the exemption change or the beneficial owner ceases to be the beneficial owner, both in
the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are advised to contact
their CSDP, broker or the transfer secretaries, as the case may be, to arrange for the abovementioned documents
to be submitted prior to payment of the distribution, if such documents have not already been submitted.
Tax implications for non-resident shareholders
Qualifying distributions received by non-resident shareholders will not be taxable as income and instead will be
treated as ordinary dividends, but which are exempt in terms of the usual dividend exemptions per section 10(1)(k)
of the Income Tax Act. It should be noted that until 31 December 2013, qualifying distributions received by non-
residents were not subject to dividend withholding tax. From 1 January 2014, any qualifying distribution received
by a non-resident from a REIT will be subject to dividend withholding tax at 20%, unless the rate is reduced in
terms of any applicable agreement for the avoidance of double taxation (DTA) between South Africa and the country
of residence of the shareholder. Assuming dividend withholding tax will be withheld at a rate of 20%, the net
amount due to non-resident shareholders will be 23.02170 cents per ordinary share. A reduced dividend withholding
tax rate in terms of the applicable DTA, may only be relied on if the non-resident shareholders have provided the
following forms to their CSDP or broker, as the case may be, in respect of the uncertificated ordinary shares, or
the transfer secretaries, in respect of certificated ordinary shares:
- a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
- a written undertaking to inform their CSDP, broker or the transfer secretaries, as the case may be, should
the circumstances affecting the reduced rate change or the beneficial owner ceases to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident shareholders
are advised to contact their CSDP, broker or the transfer secretaries, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the distribution if such documents have not already
been submitted, if applicable.
Summary of the salient dates relating to the Cash Distribution are as follows:
2017
Declaration date Monday, 20 November
Last day to trade ("LDT") cum dividend Tuesday, 5 December
Shares to trade ex-dividend Wednesday, 6 December
Record date Friday, 8 December
Payment date Monday, 11 December
Share certificates may not be dematerialised or remterialised between
Wednesday, 6 December 2017 and Friday, 8 December 2017, both days inclusive.
On behalf of the board
Mr TT Mboweni
(Non-executive chairman)
Mr M Georgiou
(Chief executive officer)
Mr D Kyriakides
(Chief financial officer)
20 November 2016
Corporate information
DIRECTORS
Mr TT Mboweni (non-executive chairman)
Mr A Costa (chief operating officer)
Dr GC Cruywagen (lead independent, non-executive director)
Mr JRP Doidge (independent non-executive director)
Mr TJ Fearnhead (independent non-executive director)
Mr M Georgiou (chief executive officer)
Mr D Kyriakides (financial director)
Ms K Madikizela (independent non-executive director)
Mr JRJ Paterson (executive director)
Prof F Viruly (independent non-executive director)
Registered office and business address
Cedar Square Shopping Centre, Management Office, 1st Floor, Cnr Willow Ave and Cedar Rd,
Fourways, Johannesburg, 2055
Tel: 010 001 0790
Web: www.acceleratepf.co.za
Investor relations
Instinctif Partners: Lizelle du Toit
Tel: 011 447 3030
Email: lizelle.dutoit@instinctif.com
Company secretary
TMF Corporate Services (South Africa) Proprietary Limited
Represented by:
Ms Joanne Matisonn
3rd Floor, 200 on Main, Cnr Main and Bowwood Roads
Claremont
7708
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Ave, Rosebank, 2196
PO Box 61051, Marshalltown, 2107, South Africa
Tel: 011 370 5000
Email: proxy@computershare.co.za
Fax: 011 688 2238
Sponsor
The Standard Bank of South Africa Limited
(Registration number 1962/000738/06)
30 Baker Street, Rosebank, 2196
PO Box, 61344, Marshalltown, 2107
Auditors
Ernst & Young Incorporated
102 Rivonia Road, Sandton, Johannesburg, 2149
Tel: 011 772 3000
Internal Auditors
LateganMashego Auditors (Pty)Ltd
Registration number 2001/107847/07
Registered address: 11 Boca Walk, Highveld, Centurion, 0157
Email: lindie@lateganmashego.co.za
Tel: 0828987644/0836091159
Attorneys
Glyn Marais Inc.
(Registration number 1990/000849/21)
2nd Floor, The Place
1 Sandton Drive
Sandton
2196
(PO Box 652361, Benmore, 2010)
Date: 20/11/2017 10:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
