JSE-listed Accelerate Property Fund is selling Eden Meander Lifestyle Centre as well as vacant land in George in the Western Cape to the Sasol Pension fund for R521m.
The asset, measuring more than 31,000m², was acquired in 2016. At the end of March, it was valued at about R521.7m and had net operating income of R35.8m.
Accelerate is a diversified Reit that owns assets valued at R9.2bn in the Fourways node, including Cedar Square and The Buzz Shopping Centre, as well as the Foreshore in Cape Town and George in the Western Cape.
The company will use the sale proceeds to reduce debt, and/or reinvest into its core property portfolio.
“The sale of the Eden Meander mall along with other disposals will help to significantly improve the interest cover ratio — a decision we believe is in the best interest of Accelerate and its shareholders,” the company said in a statement.
An interest cover ratio is the debt and profitability metric used to determine how easily a company can pay interest on its outstanding debt.
Since year-end, Accelerate sold the Leaping Frog centre and Ford Fourways buildings — reducing loan-to-value (LTV) by 1.2% and improving its interest cover ratio (ICR) by 0.1 times. Eden Meander will further reduce the LTV by 3% and improve the ICR.
For the period to end-March, Accelerate recorded a decline in its interest cover ratio of 1.8 times from 2.1 times in 2022 due to higher interest rates.
An interest cover ratio below two times is seen as risky as this is likely to end in a breach of most bank covenants, but from about 2.5 times it is considered an acceptable level for real estate investment trusts (Reits).
Funders approved Accelerate’s application to temporarily reduce its overall interest cover ratio covenant levels to 1.7 times until the end of March.
Its loan-to-value — a key measure of the financial health of a property company — increased from 42.8% during the first half of the 2022 financial year to 44.8% at the end of March, with total debt at R4.5bn.
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