Accelerate Property Fund: Azrapart is a massive overhang once more (JSE: APF)
They cannot afford any further nasty surprises
Accelerate Property Fund is a great example of a highly speculative play in the market that could go one of two ways based on not just economic considerations, but also legal battles. The net asset value (NAV) has dropped considerably to 203 cents per share as at March 2025, but this is still way above the current share price of 43 cents. Hence, the opportunity for those who are brave.
Why the large discount? Well, the market knows that if the keys to the castle end up in the hands of the banks, then shareholders can easily watch their disappear into the hands of debt providers rather than shareholders. Property funds do give a better chance of dishing out net proceeds from a business rescue process than operating companies, as there are at least clearly identifiable underlying assets that have proper values, but it’s still not fun.
Speaking of the assets, the total portfolio as at March 2025 was R7.75 billion, which is well ahead of interest-bearing borrowings of R3.75 billion. It’s also worth highlighting that although the interest coverage ratio of 1.2x and loan-to-value ratio of 47.6% aren’t exactly on the right side of debt covenants by much (1.1x and 50% respectively), Accelerate is in compliance with the requirements of its bankers. Well – mostly, that is.
My understanding is that one of the terms for ongoing support by lenders is a resolution to the related party issues. Despite much hope that a settlement agreement with Michael Georgiou’s Azrapart (the holder of the other 50% in Fourways Mall) would be signed on materially the same terms as the agreement that lapsed last year, this hasn’t happened. With Azrapart now in a business rescue process, I suspect the issue is that the decision-makers have changed on that side.
Having spent considerable time combing through the latest announcement and the related party settlement plan that was announced in 2024, it looks like Accelerate’s obvious risk is a payable to Azrapart of R300 million related to a claim regarding Fourways Mall. In turn, Azrapart owes Accelerate far more than that, like R540.6 million for the headlease and R430 million across various other amounts. The idea was that these amounts would all be set-off, along with Accelerate acquiring further assets (bulk worth R75 million and parking worth R241.5 million) from Azrapart. There was also an amount that would be set off in relation to the internalisation of the property management company.
This is an extremely technical issue and the devil will undoubtedly be in the details of the legal agreements. From what I can see, aside from the immense irritation around the bulk, parking and management agreement issues, Accelerate’s cashflow risk is needing to pay R300 million to Azrapart in a claim that perhaps won’t be capable of set-off against the other claims.
Accelerate’s balance sheet is tighter than a duck’s you-know-what, so they can’t afford this – or at least, not yet. They have R1.3 billion in property recognised as being held-for-sale, as well as agreements in place to sell properties worth R688.5 million, with Portside as the largest at R580 million. Sure, there must be debt settlements tied to such properties, but that would at least generate some liquidity to deal with Azrapart in a worst-case scenario. Hopefully, the legal wrangling will lead to a situation where Accelerate isn’t forced to part with R300 million in cash to receive nothing in return.
The good news is that the R300 million is recognised on the balance sheet as a liability and they’ve fully written-off the receivables from Azrapart, so the NAV per share of 203 cents per share has some conservatism baked into it. The risk is really around cash and liquidity rather than whether there is decent net value in this thing.
Let’s look to the future. The group is aiming to get to a loan-to-value ratio below 40%, along with an interest coverage ratio of 1.6x. The R100 million rights offer that was concluded after year-end is helpful here, but they will only get there if asset disposals go well and if the performance at Fourways Mall improves.
In terms of earnings, rental income for the year ended March 2025 was down R37.3 million, with the headlease benefit at Fourways Mall more than offsetting disposals. The rest of the decline was due to negative reversions at Fourways Mall, presumably as part of improving the vacancy rate at the mall. Fourways Mall’s vacancy rate has improved from 19.0% to 13.7%. It makes sense to me that it’s better to create a vibey mall that is full of tenants than to be stubborn on price and have loads of empty shops.
Property expenses were only down R4.6 million despite the disposals, so there’s clearly pressure on net property income, which fell by 8.3% to R495 million.
Net finance costs were down 42.3% vs. the prior year, coming in at R272 million vs. R472 million. This means that the company is able to cover its finance costs with its net property income.
To add to this pain, there’s a negative fair value adjustment of R274.3 million in the portfolio. At least that’s better than R354.8 million in the prior year, but what is obviously really needed is some stability in valuations. The total fair value adjustment on the income statement is larger due to movements in other financial items.
Accelerate is as speculative as they get, with the situation having worsened thanks to the Azrapart issue. They simply cannot afford any further negative surprises, with the transaction circular for Portside expected to be posted before 31 August 2025 (the JSE has already granted an extension here).
As a final comment, the current share price of 43 cents is slightly above the recent rights offer price of 40 cents per share.
ASP Isotopes will list on the JSE later this month (JSE: ISO)
Although not conditional on the Renergen (JSE: REN) deal, that’s an important part of the plan
As things currently stand, the scheme of arrangement that will see ASP Isotopes acquire Renergen has met almost all its conditions for implementation. We are at the point where a standby offer won’t be triggered, so we know for sure that the scheme is the way forward.
This is important, as the Renergen deal is key to ASP Isotopes achieving a reasonable spread of shareholders in its JSE listing. The listing isn’t conditional upon the Renergen deal, but is certainly boosted by it. ASP Isotopes will be listed on the JSE from 27 August 2025.
The abridged pre-listing statement is now available, giving plenty of additional detail around this cutting edge company that takes advantage of an area in which South Africa can compete with the very best in the world. But if you really want to get to grips with their core business, I can wholeheartedly recommend watching the Unlock the Stock event that featured the CEO of ASP Isotopes. At the time, the Renergen deal hadn’t been announced (and we had no idea it was coming), so the entire session was based entirely on ASP Isotopes’ core business.
Here’s the link to the recording:
Assura reaffirms its support for the Primary Health Properties deal (JSE: AHR | JSE: PHP)
KKR and Stonepeak tried to sow seeds of doubt before the offer closes
I tried to find some kind of press release or public statement by KKR and Stonepeak, the competing bidders for Assura, that would’ve triggered the activity on SENS on Friday from both Assura as the target and Primary Health Properties as the favoured bid. Alas, I had no luck in locating it.
Whatever it was, it seems as though KKR and Stonepeak took note of the low acceptance rate by Assura shareholders and used it as an invitation to remind shareholders that its cash offer is still on the table. A share-for-share merger (whether there’s a cash portion or not) opens itself up to these kind of attacks, as the implied price for the target company changes every time that the share price of the acquiring firm moves. In contrast, a cash bid is set in stone, so shareholders know exactly what the value of the bid is.
The Assura board came out with a statement reminding the market that they support the bid by Primary Health Properties. Later in the day, Primary Health Properties reminded Assura shareholders of the benefits of the deal and that the offer period will close on 12 August.
As things stood on Friday, acceptances had only been received from holders of 3.68% of Assura shares. There’s a long way to go…
Despite a lot of noise in the market, the MAS board reckons that the Prime Kapital offer is legally valid (JSE: MSP)
I’m personally not surprised, given the level of the people involved
My DMs have been busy the past couple of weeks. Based on the podcasts that I’ve done with Martin Slabbert of Prime Kapital (including the most recent one that also featured Johan Holtshausen, Chairman of PSG Capital and advisor to Prime Kapital), there have been a number of asset and wealth managers who have shared their concerns with me about the Prime Kapital bid for MAS.
This is good. Debate is healthy for a market – but I must point out that concerns around timing etc. fall rather flat when the competing Hyprop bid, which was meant to be a “white knight” for the asset management community, had a far more aggressive timeline than the Prime Kapital bid. Many of the other concerns raised with me were on technical legal points, particularly related to whether Prime Kapital is even legally entitled to make an offer.
I found this interesting, as the Prime Kapital team definitely did not strike me as people who act without sound legal advice. Getting legal advice and being legally correct are of course two different things, but on something as obvious as whether a bid is a reserved matter in the joint venture relationship (i.e. needs the approval of MAS for the bid to be made), I would’ve been extremely surprised if they had gotten it wrong.
Sure enough, the MAS board has now released an announcement dealing with a number of these issues. I’m going to repeat the paragraph about legal validity verbatim:
“Having carefully considered the largely unregulated nature of the PKI Voluntary Bid and the contractual relationships which underpin the DJV, and having obtained comprehensive South African, English and Maltese law advice, the Independent Board is of the view that there are no legal grounds or formal procedures available that would enable MAS to delay or amend the PKI Voluntary Bid timeline in any way, nor is it able to challenge the implementation thereof by PKI.”
That’s a pretty strong statement.
The announcement by MAS is incredibly detailed and I won’t go into everything here. The TL;DR is that the investment mandate that was revised in 2020 gives the joint venture the power to invest in listed securities, which of course includes MAS, provided that the securities will “optimise returns” – and for further clarity, investment in securities issued by MAS is expressly permitted in the mandate. Then, in terms of the restricted matter, MAS notes that because the preference shares would be issued by a subsidiary of the joint venture and not the joint venture itself, it falls outside of the ambit of restricted matters.
That may sound too cute or even unfair to you, but there’s no concept of fairness in commercial stuff like this. The agreement says what it says. Nothing would ever get done in corporate finance if everyone argued about fairness, as (1) that means different things to different people and (2) parties with commercial incentives will argue for fairness based on their subjective position, not an objective view. Where fairness is required in corporate law, it is expressly provided for e.g. in takeover law regarding treatment of minority shareholders. Two large corporate parties negotiating with each other can (and will) work towards getting the best possible positions for themselves, with the important thing being that there are no directors sitting on both sides of the table who are conflicted at the time of the agreement. This is where the legal concept of “disinterested” directors comes in – and no, it’s not a reference to how much they are looking forward to the next coffee break on the day of board meetings.
Speaking of what is fair to shareholders, one of the most interesting nuances of this deal is that MAS is effectively in a regulatory black hole. The company’s legal jurisdiction is Malta, where there is no such thing as takeover law in their companies act. The only takeover law application would be for companies listed in Malta or supervised by the Malta Financial Services Authority, of which MAS is neither. And even though MAS is listed on the JSE, it isn’t a South African company, hence the South African takeover regulations also don’t apply.
They’ve also noted that they can’t get an independent expert to opine on the transaction in time, given the tight offer timeline. This is the same situation that we unfortunately saw in the Hyprop offer that was subsequently withdrawn.
This means that shareholders are on their own here and won’t be able to rely on the opinion of an independent expert. But given that the underlying portfolio consists of properties that are in any event revalued at every reporting date, there’s enough information in the net asset value of the fund for shareholders to work on. In other words, this isn’t an operating company where the market would benefit tremendously from an independent expert digging through the numbers and performing a detailed valuation.
For all the irritation in the market around this matter, I must point out that the cash offer on the table, as well as the implied price under the preference shares, is a substantial premium to the share price calculated over just about any reasonable period this year. It might be at an implied discount to tangible net asset value per share, but trading at a discount is a feature of property companies on the JSE.
The full announcement by MAS goes into tons of detail on these and many other underlying points, including the risks of the deal with elements like irrevocable undertakings and the unusual timeline (the offer closes on 14 August). They correctly highlight the uncertainty regarding the liquidity of the preference shares (a point I’ve been constantly writing about) and the uncertain nature of the total cash element of the bid.
Again, I would encourage you to consider all the facts at hand when forming your own view. There is no such thing as altruism when it comes to corporate dealmaking – with billions at stake, the parties on either side of the table are incentivised to get the best deal for themselves. The Hyprop offer was the best deal in town for the asset management community, as they are already deeply invested in Hyprop. Hence, I didn’t see too many complaints from asset managers about the timeline of that offer, conditional nature of that deal or the requirement for irrevocable undertakings when there are still major conditions at play, but I’ve seen plenty of noise about the Prime Kapital offer. I understand the incentives at play here and you should make an effort to do the same.
We haven’t heard the last of this matter. In fact, I doubt we are even close. Regardless of what happens in the offer this coming week, there’s still the extraordinary general meeting to get through with a potential change to the board.
The sharp end of M&A is an exciting thing!
Thungela’s HEPS has plummeted (JSE: TGA)
The coal market hasn’t been kind to them
When you’re investing in mining groups that have exposure to just one commodity, you’re really rolling the dice. The cyclicality of commodity prices is no joke, which is why investors often turn to the more diversified mining groups for their resources exposure. At Thungela, you get a pure-play on coal – for better or worse.
In the six months to June 2025, it was definitely for the worse. HEPS has fallen by between 78% and 85%, a hideous outcome that reflects not only the tough conditions in the coal market, but also the restructuring costs of R285 million that Thungela has recognised in relation to Goedehoop and Isibonelo.
Detailed results are due for release on 18 August. With the share price down 30% year-to-date, the market will pay close attention to them.
Nibbles:
- Director dealings:
- The CEO of Invicta (JSE: IVT) certainly isn’t playing around, buying shares in the company worth R17 million.
- An associate of the CEO of Acsion (JSE: ACS) bought shares worth R1.05 million.
- The CEO of Spear REIT (JSE: SEA) bought more shares for his kids, this time to the value of R24.4k.
- The CEO of Vunani (JSE: VUN) remains on the bid, buying shares worth R2.4k.
- Hulamin (JSE: HLM) has reached an important milestone linked to its R500 million capital investment that was announced back in 2022. This investment was designed to increase local manufacturing of cans, thereby reducing reliance on imports. The first two phases of the investment were completed in 2024 and the final phase was completed in July this year. The testing was successful, with the mill now processing trial wide-width canbody coils. The focus for the rest of the year is to complete product qualification, with commercial readiness targeted for the end of Q1 2026.
- Alphamin (JSE: APH) releases such detailed quarterly production updates that the actual filing of financials is practically a non-event, such is the level of information already digested by the market. But what is interesting, apart from the declaration of a dividend, is that the new controlling shareholder (International Resources Holding) has appointed two directors to the board of the company.
- Delta Property Fund (JSE: DLT) shareholders gave strong approval to the disposal of 88 Field Street, a deal that is now unconditional.
- UK property fund Hammerson (JSE: HMN) has finalised the acquisition of the other 50% stake in Bullring and Grand Central, taking their ownership to 100%. This deal was announced recently along with a more encouraging outlook on regional property valuations.
- Due to ill health, the CEO of Wesizwe Platinum (JSE: WEZ) has stepped down from his role. It’s almost sad seeing something like that, where somebody’s career has been cut short by a factor outside of their control.
