R60 million shopping mall trouble in South Africa

 ·8 Jul 2024

Accelerate Property Fund (APF) is no longer proceeding with the sale of Cherry Lane Shopping Centre in Pretoria, with the deal being called off for the third time in a year.

In June, Accelerate Property Fund (APF) announced it would sell the Cherry Lane Shopping Centre for R57 million.

The centre is located in Brooklyn Circle in Pretoria, near Brooklyn Mall.

The mall was acquired by APF in 2013 and valued at around R60 million at the end of March 2024.

Shareholders have been advised that the disposal of the Property to QSPACE Limited will no longer be proceeding, and the agreement has been terminated.

This is not the first time that APF has had trouble selling the mall. It previously tried to sell the centre for R65 million in 2023, valued at around R70 million. It tried again in March 2024, but that deal also fell through.

That said, APF is currently discussing the property with several other potential purchasers.

The group previously said that the proceeds of the sale would be used to reduce its debt and reinvest in its core property portfolio.

“This decision was made as part of Accelerate’s ongoing efforts to review its assets and ensure that they align with the company’s current business strategy and growth plans,” it said in June.

Accelerate is the co-owner of South Africa’s biggest mall, Fourways Mall, which is facing significant headwinds.

Its latest results for the six months ended 30 September 2023 show that the group’s vacancies at the mall increased from 14,349 sqm in March 2023 to 15,109 sqm.

The mall’s net rent per square meter declined from R298 in 2020 to R262 in 2023 – a blow to any owner faced with increasing costs.

Like Cherry Lane, Fourways Mall’s fair value has also declined over the year, with Accelarate’s 50% shareholding value dropping from R4.8 billion in 2020 to R4.02 billion three years later.

This puts Fourways’ fair value at just over R8 billion from close to R9.6 billion before.

The group is proceeding with an R200 million rights offer to raise capital from shareholders, address its finances, and focus on restoring its core operations.

Changes will include a renewed focus on Fourways Mall and facilitating improvements through a strategic asset manager to increase traffic to the mall.

The strategy will offer retail options within a convenient, safe, and engaging environment. It includes:

  • Improved signage for easy navigation.

  • Introducing new tenants.

  • Deploying full backup power solutions and exploring energy alternatives.

  • Enhanced parking area lighting and upgraded security measures.

  • Optimise traffic flow and make parking bays bigger.

  • Revitalise the surrounding area, with attention to taxi services, hawkers, landscaping, and traffic light systems.
Fourways Mall is undergoing a revitalisation programme

Shopping mall troubles

Shopping malls in South Africa are under strain. Vacancy rates remain problematic, and trading density for prime retail space has declined.

Retailers have been under pressure over the last few years as consumers remain financially constrained and have become more discerning about where they spend their time and money.

This is due to both persistently high interest rates (currently stuck at a 15-year high) and high levels of inflation which have eaten away at salaries in real terms, cutting disposable income.

According to the Clur Shopping Centre Index, trading density levels dropped further in Q1 2024, even if the rate of contraction was more muted than the final half of 2023.

However, mid-sized centres should be primed to take advantage of a shift in shopper behaviour, Clur said, by embracing a “lifestyle stance, with a focus on balance, health, wellness and zen-seeking”.

While some property owners have sought to escape the pains by selling or shifting ownership, others have turned to rehabilitation or revitalisation to try and make the centres more appealing to consumers.

This includes the aforementioned plans by Fourways Mall and its new managers, as well as iconic centres, like one of South Africa’s oldest shopping malls, the Musgrave Centre, which is progressing with its own revamp.

Despite consumer stress and retailer pain, South Africa has not slowed down on the development of new shopping malls and centres – though there has been a notable shift to smaller ‘strip mall’ and lifestyle centre developments.

Read: Another major company in South Africa enters business rescue

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