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ACCELERATE PROPERTY FUND LIMITED - Interim financial results for the six months ended 30 September 2018

Release Date: 26/11/2018 08:00
Code(s): APF     PDF:  
 
Wrap Text
Interim financial results for the six months ended 30 September 2018

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")

CONDENSED CONSOLIDATED INTERIM FINANCIAL Results
for the six months ended 30 September 2018

HIGHLIGHTS

- PROPERTY PORTFOLIO VALUE OF R12,6 billion
- TOTAL PORTFOLIO GLA OF 621 120 m2
- NET ASSET VALUE GROWTH OF 8,2%  (YEAR ON YEAR)
- TENANT RETENTION 92,1%

KEY INDICATORS
Indicator                                   30 September 2018  31 March 2018
Portfolio value                                 R12,6 billion  R12,3 billion
GLA                                                 621 120 m2     623 988 m2
Number of properties                                       66             67
Net asset value                                  R8,0 billion   R7,8 billion
Cost-to-income ratio                                    15,8%          14,8%
Weighted average lease expiry                       5,4 years      5,5 years
Lease escalations (excluding offshore)*                  7,3%           7,7%
Vacancies                                                7,8%         10,04%
Listed/large national tenants (by revenue)              64,6%          65,7%

* 6,9% including offshore.

OUR FOCUS AREAS

The company continues to focus on the following three main priorities for the 2019 financial year:

1. Completion of the Fourways Mall super-regional development
- Opening date is 25 April 2019.
- Approximately 450 stores.
- The centre's gross lettable area (GLA) will be approximately 178 000 m2 (excluding Leroy Merlin's flagship store which is separately developed and owned). Leroy Merlin stores are DIY
  hypermarkets established near urban areas. There are four main departments (DIY, building, decor and gardening) offering a range of products tailored to customers' needs. The Leroy Merlin
  store will be linked to the mall via a bridge connection over Fourways Boulevard.
- Estimated GLA on completion, including Leroy Merlin and bridge link, will be more than 200 000 m2.

As the mall nears completion, tenant demand in the node has increased. Examples include:
- Fourways View: Pet World, the largest pet store in northern Johannesburg (655 m2) (http://petworld.co.za/); and Westpack (https://www.westpacklifestyle.co.za/) (2 450 m2).
- Cedar Square: Woolworths (3 000 m2 of GLA) in July 2017; Smoke Daddy's (414 m2); Laurentina (354 m2); Tiger's Milk (728 m2); and Sofaworx (637 m2).

2. Extracting maximum value from the portfolio
In these trying economic times the fund continues to focus on cost management and identifying and maximising alternative but sustainable revenue streams, such as:
- non-GLA revenue;
- renewable energy revenue;
- advertising revenue; and
- development returns.

3. Reducing gearing levels and other balance sheet optimisation
Accelerate's strategy has always been to add quality defensive properties to its portfolio, as opposed to high-yielding, inferior properties. Since listing (December 2013), this strategy
has resulted in several exceptional properties being acquired: CitiBank's A-grade office in Sandton; KPMG's A-grade head office in Gauteng; Eden Meander retail convenience centre in
George; Portside (approximately 50%) P-grade office in Cape Town Foreshore; and an offshore retail portfolio backed by a leading DIY retailer OBI, predominantly in Austria.

These properties, together with the existing portfolio, including Fourways Mall, Cedar Square and our A-grade Foreshore office properties, anchor the fund into the future. The acquisitions
contributed to the fund's loan-to-value (LTV) growing above the targeted 35% level.

Given this, and the upcoming equalisation, the fund has embarked on projects to reduce gearing levels while protecting the overall defensive nature of the portfolio.

Accelerate concluded a joint venture agreement with a development partner to develop residential units on The Buzz bulk in Fourways adjacent to The Buzz and Waterford shopping centres on
Witkoppen Drive. Approximately 500 units are anticipated to be built. Accelerate will receive phased revenues for the sale of the land and share in development profits. Total profits from
this project are expected to be in excess of R100 million. We expect to break ground in 2019.

Post-30 September 2018, Accelerate signed two portfolio sales to BEE purchasers for a total of R510 million. There is only one suspensive condition outstanding on both sales. The portfolio
comprises non-core properties.

A further portfolio sale of approximately R300 million is under negotiation and additional ad-hoc sales of R200 million of non-core properties are in various stages of finalisation.

In addition, two sales of R450 million and R250 million are being negotiated/completed, please see the roadshow document on the company's website for potential LTV reduction.

The intention is to utilise proceeds of sales towards debt reduction and share buy backs.

FINANCIAL POSITION

As at 30 September 2018, Accelerate's investment property portfolio had a value of R12,6 billion (31 March 2018: R12,3 billion), excluding the effects of straight-lining. The increase in
the value of the portfolio is due to an increase in the external valuation of the funds offshore assets, as well as capex spend on existing assets in our local portfolio.

The slight increase in Accelerate's debt from 31 March 2018 is predominantly due to the deterioration of the rand:euro exchange rate, as well as nominal debt raised locally for, inter
alia, capex spend and development projects.

Long-term debt allocation - 30 September 2018
Bank funding - South African portfolio           30 September 2018         31 March 2018      
                                                                Rm      %             Rm      %
Debt capital markets                                         1 785   32,9          1 487   28,9
Bank funding                                                 3 631   67,1          3 663   71,1
Total                                                        5 416  100,0          5 150  100,0
Weighted average debt term (years)**                           2,1                   2,1
Short-term portion of debt*                                  1 726   31,9          1 492   28,9
Debt hedged***                                                       96,0                  97,4
Weighted average swap term (years)                             1,9                   2,1
Blended interest rate (9,2% excluding offshore)                       8,3                   8,4
Interest cover ratio (x)                                       2,3                   2,4
LTV                                                                  41,9                  40,7

* R300 million of debt has been refinanced post-30 September 2018. Negotiations are well under way for the refinance of the December 2018 debt.
** Post-30 September 2018 the weighted average debt term improved to 2,3 years.
*** The current hedging level is intended to mitigate the R1,6 billion swap expiring on 31 March 2019. The company continues to manage this risk and is comfortable given current
    conditions.

FINANCIAL PERFORMANCE

Despite a renewal of positive sentiment in early 2018, the South African economy is now in recession, and under continuous pressure given amongst other factors the recent deterioration of
the rand and significant increases in the fuel price.

The property sector, in particular the retail sector, is struggling due to tough market conditions, lack of consumer spending and increased costs of providing goods and services. We have
seen little to no improvement in property fundamentals.

Given this economic backdrop, our focus on tenant retention, reduction of vacancies, cost control, and protecting our income stream is imperative.

With concerted effort portfolio vacancies have improved. However, this is on the back of reduced rentals and greater than anticipated tenant assistance. The fund saw negative rental
reversions of 4% (31 March 2018: 6,2% positive) on renewals. This trend is expected to continue in the short term given the current operating environment.

Strategic spend and investment in our core portfolio, increased finance costs, unreasonable increases in rates, and the smoothing of a large in the money swap expiring in March 2019,
coupled with the current economic conditions has resulted in negative distribution growth for the period under review.

The net cost-to-income ratio rose slightly to 15,8% as expected (31 March 2018: 14,8%). Arrears remain relatively stable, and our portfolio weighted average lease expiry remains defensive,
in excess of five years.

Our distribution per share is consistent with guidance provided prior to the company entering the closed period and is 27,26021 cents (2017: 28,77713 cents).

With various positive steps under way to reduce gearing and undertake share buy backs, filling of vacancies, together with significant earnings-enhancing initiatives such as The Buzz
residential development, coupled with the ultimate 50% ownership of what will arguably be the leading super-regional shopping centre in southern Africa, the fund is well positioned for the
medium to long term.

Distributions per share is used as a performance measure for trading statement purposes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                              30 September 2018  31 March 2018
                                    Note(s)               R'000          R'000
ASSETS
Non-current assets                                   12 894 712     12 533 952
Investment property                                  12 877 752     12 515 562
Derivatives                              2               15 885         17 371
Property, plant and equipment                             1 075          1 019
Current assets                                          701 444        649 579
Current tax receivable                                    5 534          5 534
Derivatives                                               2 603          1 887
Trade and other receivables              2              631 542        565 237
Cash and cash equivalents                2               61 765         76 921
Investment property held for sale                        56 474         27 000
Non-current assets held for sale                         56 474         27 000

Total assets                                         13 652 630     13 210 531
EQUITY AND LIABILITIES
Equity                                                7 974 113      7 861 866
Ordinary share capital                                5 112 984      5 103 067
Other reserves                                           67 995         25 923
Non-controlling interest                                 16 342         14 519
Retained income                                       2 776 792      2 718 357

Total equity                                          7 974 113      7 861 866
Non-current liabilities                               3 721 156      3 682 224
Borrowings                               2            3 689 263      3 654 607
Derivatives                                              31 893         27 617
Current liabilities                                   1 957 361      1 666 441
Trade and other payables                 2              231 361        173 526
Derivatives                                                   -            385
Borrowings                               2            1 726 000      1 492 530

Total equity and liabilities                         13 652 630     13 210 531

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                                                             For the six        For the six
                                                                                                            months ended       months ended
                                                                                               Note(s) 30 September 2018  30 September 2017
                                                                                                                   R'000              R'000
Revenue, excluding straight-line rental revenue adjustment                                                       602 972            606 305
Straight-line rental revenue adjustment                                                                           33 065             26 921
Revenue                                                                                                          636 037            633 226
Property expenses                                                                                               (188 716)          (169 024)
Net property income                                                                                              447 321            464 202
Operating expenses                                                                                               (24 304)           (26 689)
Operating profit                                                                                                 423 017            437 513
Fair value adjustments                                                                              4             30 140            (54 699)
Unrealised gains                                                                                                  20 915             81 213
Other income                                                                                                       1 048                648
Finance income                                                                                                    31 777             36 345
Profit before long-term debt interest and taxation                                                               506 897            501 020
Finance costs                                                                                                   (178 028)          (180 155)
Profit before taxation                                                                                           328 869            320 865
Taxation                                                                                                               -               (883)
Profit for the period                                                                                            328 869            319 982
Other comprehensive income that may be reclassified to profit and loss in subsequent periods
Exchange differences on translation of foreign operations                                                         45 248              4 907
Total comprehensive income                                                                                       374 117            324 889
Profit attributable to:
Shareholders of the parent                                                                                       326 899            318 813
Non-controlling interest                                                                                           1 970              1 169
EARNINGS PER SHARE
Basic earnings per share (cents)                                                                                   33,02              33,21
Diluted earnings per share (cents)                                                                                 32,41              32,74
DISTRIBUTABLE EARNINGS
Profit after taxation attributable to equity holders                                                             326 899            318 813
Less: straight-line rental revenue adjustment                                                                    (33 065)           (26 921)
Less: unrealised gains                                                                                           (20 915)           (81 213)
(Less)/add: fair value adjustments                                                                               (28 829)            55 358
Add: Lease amortisation                                                                                           10 262                  -
Distributable earnings                                                                                           254 352            266 037
Distribution per share (cents)                                                                                    27,260             28,777

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                                                                                 Total
                                                                                                 Foreign                                  attributable                   
                                                                                                currency                                     to equity         Non-                                 
                                                                                             translation     Other      Share   Retained    holders of  controlling      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 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  5 092 861  2 218 017     7 337 312       15 102  7 352 414
Balance at 1 April 2018                                                                            4 520    21 403  5 103 067  2 718 357     7 847 347       14 519  7 861 866
Profit for the period                                                                                  -         -          -    326 899       326 899        1 970    328 869
Other comprehensive income                                                                        45 395         -          -          -        45 395         (147)    45 248
Total comprehensive income attributable to equity holders                                         45 395         -          -    326 899       372 294        1 823    374 117
Issue of shares                                                                                        -    (9 917)     9 917          -             -            -          -
Distribution paid                                                                                      -         -          -   (268 464)     (268 464)           -   (268 464)
Conditional share plan reserve                                                                         -     6 594          -          -         6 594            -      6 594
Total contributions by and distributions to owners of company recognised directly in equity            -    (3 323)     9 917   (268 464)     (261 870)           -   (261 870)
Balance at 30 September 2018                                                                      49 915    18 080  5 112 984  2 776 792     7 957 771       16 342  7 974 113

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                    For the six        For the six
                                                                   months ended       months ended
                                                              30 September 2018  30 September 2017
                                                                          R'000              R'000
Cash flows from operating activities
Cash generated from operations                                          294 288            261 688
Distribution paid                                                      (268 464)          (232 412)
Finance income                                                           31 777             36 345
Tax paid                                                                      -               (271)
Net cash from operating activities                                       57 601             65 350
Cash flows from investing activities
Sale/(purchase) of property, plant and equipment                             46               (206)
Purchase of investment property/capitalised cost                       (179 857)          (126 886)
Proceeds from disposal of investment property                            27 000                  -
Net cash from investing activities                                     (152 811)          (127 092)
Cash flows from financing activities
New long-term borrowings                                                800 436            847 664
Settled long-term borrowings                                           (545 499)          (525 000)
Repurchase of shares                                                          -            (63 150)
Finance costs                                                          (178 028)          (180 155)
Antecedent distribution                                                       -            (36 999)
Net cash from financing activities                                       76 909             42 360
Total cash movement for the period                                      (18 301)           (19 382)
Effects of exchange rate movements on offshore cash balances              3 145                  -
Cash at the beginning of the period                                      76 921            133 618
Total cash at the end of the period                                      61 765            114 236

DISTRIBUTION ANALYSIS

                                                                    For the six        For the six
                                                                   months ended       months ended
                                                              30 September 2018  30 September 2017
                                                                          R'000              R'000
Distributable earnings                                                  254 352            266 037
Shares qualifying for distribution
Number of shares at period-end                                      993 689 874        986 372 706
Less: Bulk ceded shares to Accelerate#                              (51 070 184)       (51 070 184)
Less: Shares repurchased                                             (9 567 404)       (10 828 803)
Shares qualifying for distribution                                  933 052 286        924 473 719
Interim distribution per share (cents)                                 27,26021           28,77713

# The cession on these shares relates 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        For the six
                                                                    months ended       months ended
                                                               30 September 2018  30 September 2017
                                                                           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                                                   326 899            318 813
Fair value adjustment on investment property                             (33 491)            (9 134)
Headline profit attributable to shareholders                             293 408            309 679
Basic earnings per share (cents)                                           33,02              33,21
Diluted earnings per share (cents)                                         32,41              32,74
Headline earnings per share (cents)                                        29,64              32,26
Diluted headline earnings per share (cents)                                29,09              31,80
Shares in issue at the end of the period                             993 689 874        986 372 706
Weighted average number of shares in issue                           990 013 765        960 010 924
Dilutionary instruments
Shares subject to the conditional share plan                          18 753 047         13 818 819
Weighted average number of dilutionary instruments                    18 753 047         13 818 819
Total diluted weighted average number of shares in issue           1 008 766 812        973 829 743

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. The company 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 2017 (six months)
                                                                                                  European                       
                                                                 Office   Industrial     Retail     retail       Total
                                                                  R'000        R'000      R'000      R'000       R'000           
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 gains                                                                                                81 213
Other income                                                                                                       648
Fair value losses                                                                                              (54 699)
Finance income                                                                                                  36 345
Long-term debt interest                                                                                       (180 155)
Profit before tax                                                                                              320 865

Period ended 30 September 2018 (six months)
                                                                                                  European       
                                                                  Office  Industrial     Retail     retail       Total 
                                                                   R'000       R'000      R'000      R'000       R'000
Statement of comprehensive income
Revenue, excluding straight-line rental revenue adjustment       167 865      30 320    352 962     51 825     602 972
Straight-line rental adjustment                                   18 779         885     13 401          -      33 065
Property expenses                                                (37 020)     (6 384)  (121 618)   (23 694)   (188 716)
Segment operating profit                                         149 624      24 821    244 745     28 131     447 321
Fair value adjustments on investment property                     (1 621)          -          -     36 423      34 802
Segment profit                                                   158 003      24 821    234 745     64 554     482 123
Other operating expenses                                                                                       (24 304)
Other income                                                                                                     1 048
Fair value loss on financial instruments                                                                        (4 662)
Unrealised gains                                                                                                20 915
Finance income                                                                                                  31 777
Long-term debt interest                                                                                       (178 028)
Profit before tax                                                                                              328 869

For the year ended 31 March 2018
                                                                                                  European       
                                                                  Office  Industrial     Retail     retail       Total
                                                                   R'000       R'000      R'000      R'000       R'000
Statement of financial position extracts at 31 March 2018
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
Capitalised costs                                                 12 314       1 775    205 755          -     219 844
Disposals                                                        (81 945)          -   (194 462)         -    (276 407)
Investment property held for sale                                      -           -     27 000          -      27 000
Straight-line rental revenue adjustment                           31 095         991     13 733          -      45 819
Foreign exchange gains                                                 -           -          -     27 756      27 756
Fair value adjustments                                           158 497    (116 567)   529 387     18 544     589 861
Segment assets at 31 March 2018                                3 444 511     536 740  7 263 301  1 298 010  12 542 562
Other assets not managed on a segmental basis
Derivatives                                                                                                     17 371
Equipment                                                                                                        1 019
Current assets                                                                                                 649 579
Total assets                                                                                                13 210 531

For the period ended 30 September 2018
                                                                                                  European       
                                                                  Office  Industrial     Retail     retail       Total 
                                                                   R'000       R'000      R'000      R'000       R'000
Statement of financial position extracts at 30 September 2018
Assets
Investment property balance 1 April 2018                       3 444 511     536 740  7 263 301  1 298 010  12 542 562
Capital expenditure                                               50 905       2 534    126 148          -     179 587
Disposals/classified as held for sale                            (27 000)          -    (56 474)         -     (83 474)
Investment property held for sale                                      -           -     56 474          -      56 474
Foreign exchange gains                                                 -           -          -    171 210     171 210
Straight-line rental revenue adjustment                           18 779         885     13 401          -      33 065
Fair value adjustments                                            (1 621)          -          -     36 423      34 802
Segment assets at 30 September 2018                            3 485 574     540 159  7 402 850  1 505 643  12 934 226
Other assets not managed on a segmental basis
Derivatives                                                                                                     15 885
Equipment                                                                                                        1 075
Current assets                                                                                                 701 444
Total assets                                                                                                13 652 630

NOTES TO THE FINANCIAL STATEMENTS

Corporate information
The condensed consolidated interim financial statements of Accelerate for the period ended 30 September 2018 were authorised for issue in accordance with a resolution of the directors
passed on 26 November 2018. 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 consolidated interim financial statements for the period ended 30 September 2018 are prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), contain 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 the Financial Reporting Standards Council, the requirements of the Companies Act of South
Africa, 71 of 2008.

The accounting policies applied in the preparation of these condensed consolidated interim financial statements are in terms of IFRS and are consistent with those applied in the previous
financial period, except for the new and amended IFRS that became effective during the 30 September 2018 reporting period, none of which had any material impact on Accelerate's financial
results.

These condensed consolidated interim financial statements have been prepared under the historical cost convention, except for investment properties and derivatives 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 three-year rolling cycle.

These condensed consolidated interim 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

Changes in accounting policy
The accounting policies adopted are consistent with those of the previous financial period, except for the new standards, amendments and interpretations that became effective during the 30
September 2018 reporting period. However, they are not expected to have a significant impact on the annual financial statements of Accelerate.

The following accounting standards have been adopted by Accelerate, their impact is discussed below.

IFRS 9 Financial Instruments
The impact of the implementation of IFRS 9 in the current financial period is as follows:
- Trade receivables
  Accelerate previously evaluated the possible credit loss per tenant on a case-by-case basis and provided for the possible loss in the annual financial statements. This assessment is re-
  evaluated on an ongoing basis and the provision adjusted. This method of accounting has remained materially the same after the implementation of IFRS 9.

IFRS 15 Revenue from Contracts with Customers
- The adoption of IFRS 15 did not have any impact on the presentation and disclosure of Accelerate's financial statements.

IFRS 16 Leases
- Accelerate is not party to any material lease contracts as a lessee. Due to the nature of Accelerate's 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 has remained substantially unchanged from previous 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 of financial 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. 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 2018 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 the market behaviour that is 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 capitalisation 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 2018 were performed by Mills Fitchet (TVL) (Pty) Ltd and David Hoffman Valuations CC, credited independent valuers 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 2018 to 30 September 2018 is predominantly due to acquisitions and disposals during the period. New properties
acquired were recognised 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 2018 and have deemed the valuations performed at 31 March 2018 to still be
applicable at 30 September 2018.

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:

Class of property      Fair value at         
                   30 September 2018     Current     Long-term   Estimated period       
                               R'000   vacancies     vacancies     of convergence
Office                     3 485 574   0% - 100%      5% - 10%            2 years
Industrial                   540 159          0%            0%                n/a
Retail                     7 402 850  0% - 64.2%      5% - 10%            3 years
European retail            1 505 643          0%            0%                n/a
Total                     12 934 226

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

Class of property      Fair value at                       
                   30 September 2018
                               R'000  Valuation technique     Key unobservable inputs               Ranges
Office                     3 485 574  Income capitalisation/  ERV                       R46,00 - R249,00/m2
                                      DCF method              Rental growth p.a.                      7,7%
                                                              Long-term vacancy rate              5% - 10%
Industrial                   540 159  Income capitalisation/  ERV                       R34,00 - R147,00/m2
                                      DCF method              Rental growth p.a.                      7.8%
                                                              Long-term vacancy rate                    0%
Retail                     7 402 850  Income capitalisation/  ERV                      R45,00 - R238,00/m2
                                      DCF method              Rental growth p.a.                      7.7%
                                                              Long-term vacancy rate              5% - 10%
European retail            1 505 643  Income capitalisation/  ERV                       R69,00 - R207,00/m2
                                      DCF method              Rental growth p.a.                        0%
                                                              Long-term vacancy rate                    0%
                          12 934 226

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 net 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 for 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 fund's portfolios of investment property are:
- ERV
- Rental growth
- Long-term vacancy rate
- Discount rate/yield

Significant increases/(decreases) in the ERV (per m2 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 m2 p.a.) is accompanied by:
- a similar change in the rental 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 5,9% if the equivalent yield is increased, and increase by 6,9% if the equivalent yield is decreased.

2. Fair value of financial assets and liabilities
   31 March 2018
                                         Carried at fair    Amortised        
                                                   value        cost#        Total
                                                   R'000        R'000        R'000
Financial assets
Trade and other receivables                            -      565 235      565 235
Derivatives*                                      19 258            -       19 258
Cash and cash equivalents                              -       76 921       76 921

Total financial assets                            19 258      642 156      661 414
Financial liabilities
Derivatives*                                     (28 002)           -      (28 002)
Long-term interest-bearing borrowings                  -   (3 654 607)  (3 654 607)
Trade and other payables                               -     (165 401)    (165 401)
Current portion of long-term debt                      -   (1 492 530)  (1 492 530)

Total financial liabilities                      (28 002)  (5 312 538)  (5 340 540)

30 September 2018
                                         Carried at fair    Amortised        Total
                                                   value        cost#        R'000
                                                   R'000        R'000
Financial assets
Trade and other receivables                            -      631 542      631 542
Derivatives*                                      18 488            -       18 488
Cash and cash equivalents                              -       61 765       61 765

Total financial assets                            18 488      693 307      711 795
Financial liabilities
Derivatives*                                     (31 893)           -      (31 893)
Long-term interest-bearing borrowings                  -   (3 689 263)  (3 689 263)
Trade and other payables                               -     (223 985)    (223 985)
Current portion of long-term debt                      -   (1 726 000)  (1 726 000)

Total liabilities                                (31 893)  (5 639 248)  (5 671 141)

* The values of the derivative financial assets 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

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 Ltd. M Georgiou owns 100% of Fourways Precinct (Pty) Ltd through The Michael Family Trust and also owns 100% of Accelerate Property Management Company (Pty) Ltd.

Related-party transactions and balances                           At                  At
                                                   30 September 2018       31 March 2018
                                                               R'000               R'000
Related-party balances
Loan accounts
The Michael Family Trust                                      63 462              62 142
Fourways Precinct (Pty) Ltd                                   53 088              39 646
Vacancy guarantee
Fourways Precinct (Pty) Ltd                                   17 627              17 038
Development guarantee
Fourways Precinct (Pty) Ltd                                  159 072             105 629

Related-party transactions                               For the six         For the six
                                                        months ended        months ended
                                                   30 September 2018   30 September 2017
                                                               R'000               R'000
Related-party transactions
Development guarantee
Fourways Precinct (Pty) Ltd                                   49 801              25 721
Interest charged
Interest charged on outstanding amounts:
Fourways Precinct (Pty) Ltd                                    6 581               3 165
The Michael Family trust                                       2 268               1 910
Property management costs
Fourways Precinct (Pty) Ltd                                   (2 174)             (1 906)
Accelerate Property Management Company (Pty) Ltd              (3 543)             (3 744)
Letting commission
Fourways Precinct (Pty) Ltd                                   (5 211)             (3 282)

4. Fair value adjustments
Fair value adjustments                                  For the six-        For the six-
                                                  month period ended  month period ended
                                                   30 September 2018   30 September 2017
                                                               R'000               R'000
Fair value gain on investment property                        34 802               9 793
Mark to market movement on swaps                              (4 662)            (64 492)
                                                              30 140             (54 699)

5. Economic hedges

Interest rate swaps
Accelerate holds interest rate swap contracts with notional amounts of R4 500 000 000 (31 March 2018: R4 400 000 000), 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 July 2022 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 R14 795 687 (31 March 2018: R26 114 516).

The valuation techniques applied to determine the fair value of 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 EUR21 000 000 (2017: EUR21 000 000) 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 negative R28 201 231 (31 March 2018: R17 371 005).

6. Capital commitments
In terms of Accelerate's budgeting process, R155 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. SPVs funded through bank debt from RMB can acquire shares up to a maximum of R205 million in Accelerate at market-related share prices. The
interest on bank debt in the SPVs 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 SPVs 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 63,5% 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 2018 R189,5 million of the RMB facility was drawn down. At 30 September 2018 a liability of R70,5 million was recognised for this guarantee.

8. SUBSEQUENT EVENTS
Non-adjusting events after 30 September 2018
Eshowe Mall in KwaZulu-Natal was sold on 9 November 2018 for R60 million.

DIRECTORS' RESPONSIBILITY STATEMENT
The directors of Accelerate assume full responsibility for the preparation of the condensed consolidated interim financial statements.

INTERIM DISTRIBUTION
The board of Accelerate has declared a final cash distribution (number 10) (cash distribution) of 27,26021 cents per ordinary share (2017: 28,77713 cents per ordinary share) for the period
ended 30 September 2018.

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 993 689 874 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, 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 27,26021 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 above mentioned 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 21,80817 cents per ordinary share. A reduced dividend withholding tax rate in terms of the
applicable DTA may only be relied upon 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 above mentioned 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: (to be updated when finalised)
                                                        2018
Declaration date                         Monday, 26 November
Last day to trade (LDT) cum dividend    Tuesday, 11 December
Shares to trade ex-dividend           Wednesday, 12 December
Record date                              Friday, 14 December
Payment date                            Tuesday, 18 December

Share certificates may not be dematerialised or rematerialised between Wednesday, 12 December 2018 and Friday, 14 December 2018, both days inclusive.

On behalf of the board

Mr G Cruywagen                Mr M Georgiou                  Mr D Kyriakides
Non-executive chairman        Chief executive officer        Chief financial officer

26 November 2018


CORPORATE INFORMATION

Directors*
Mr A Costa (chief operating officer)
Dr GC Cruywagen (lead independent, non-executive chairman)
Mr JRP Doidge (independent non-executive director)
Mr TJ Fearnhead (independent non-executive director)
Mr MN Georgiou (chief executive officer)
Mr D Kyriakides (chief financial officer)
Ms K Madikizela (independent non-executive director)
Mr JRJ Paterson (executive director)
Associate Prof FM 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
Articulate Capital Partners
Morne Reinders
082 480 4541
morne@articulatepartners.com
Noah Greenhill
082 881 0089
noah@articulatepartners.com

Company secretary
Joanne Matisonn
Company secretary
Centre management offices
Cedar Square shopping centre
Cnr Cedar Rd and Willow Ave, Fourways, 2196

Transfer secretaries
Computershare Investor Services (Pty) Ltd
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
Lategan Mashego Auditors (Pty) Ltd
(Registration number 2001/107847/07)
11 Boca Walk, Highveld, Centurion, 0157
Email: lindie@lateganmashego.co.za
Tel: 082 898 7644/083 609 1159

Attorneys
Glyn Marais Inc.
(Registration number 1990/000849/21)
2nd Floor, The Place, 1 Sandton Drive, Sandton, 2196
PO Box 652361, Benmore, 2010


* Mr TT Mboweni resigned as non-executive chairman during the period due to his appointment as Minister of Finance.


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