In this edition of Ghost Bites:
- Accelerate Property Fund: a cleaner balance sheet, but will the market care?
- Hammerson is doing well – and raising capital accordingly
- Hyprop has closed the acquisition of Galleria Burgas
- Primary Health Properties lives up to its defensive promise
- Stor-Age adds some Xtraspace to its portfolio
Accelerate Property Fund: a cleaner balance sheet, but will the market care? (JSE: APF)
Turnarounds are so tough
Accelerate Property Fund is one of the few exceptions I’ve made in my life when it comes to speculative stocks.
I generally avoid companies that have particularly high risk factors. With Accelerate, I got myself across the line through a combination of the underlying property exposure, the progress made in saving the balance sheet and the discounted share price relative to the assets.
The thing that I didn’t do was sell the shares when they climbed significantly in value. I tend to be much better at buying shares than selling them. I’m working on getting better at this. After all, nobody said investing was easy!
My position is still in the green, but not by much. This begs the question: should I be buying more?
There are a number of encouraging elements in the results for the year ended March 2026. For example, Accelerate sold four properties and vacant land for R788.5 million. Subsequent to the end of the reporting period (which was a few months ago), they’ve disposed of further assets for R278.2 million. This has done good things for the balance sheet.
With so many disposals of properties, looking at the movement in total revenue doesn’t make sense. It’s better to look at like-for-like revenue, in which case rentals were up by 1.4%. That’s not exciting, but it’s better than you would expect to see in a battered property company.
Accelerate doesn’t give such user-friendly disclosure when it comes to expenses. Property expenses were lower, but that’s impacted by disposals as well. It does look like they’ve made progress on reducing central costs as well, like professional fees.
Here’s more good news: vacancies have decreased from 19.4% to 10.9%. Once the post-period disposals are considered, vacancies are down at 8.4%. Notably, Fourways Mall saw vacancies decrease from 13.7% to 9.7%, while trading density increased by 8.4%. Recent letting is expected to take that vacancy rate closer to 5%.
Finance costs are critical to consider. Thanks mainly to asset disposals (R777.3 million was used to reduce debt), finance costs on interest bearing borrowings fell by 16.1%. The average cost of funding also helped, as this improved from 10.9% to 9.9%. Notably, a R50 million rights issue funded a R39.6 million capex bill at Fourways Mall. The rest was applied to working capital needs.
Looking ahead, the current funding facilities mature at the end of March 2027. The group has made a lot of progress, so I hope that negotiations with lenders will go well. The loan-to-value ratio has improved dramatically from 48.3% to 43.7% over the past 12 months.
The balance sheet isn’t out of the woods yet, so I’m not surprised that there’s no dividend for the period.
The more controversial element of these results is the fight with Azrapart, the entity linked to Michael Georgiou. This is a long and sordid tale that includes multiple agreements and even a business rescue process. The complexity is that there have been both assets and liabilities on Accelerate’s balance sheet related to this mess. The original plan to achieve a settlement of everything was much cleaner than where we stand today, as there’s a chance that either the asset or liability could be triggered (or both – or neither!). Uncertainty is never fun for investors.
In the prior year, Accelerate impaired the related party balance by R970.7 million, although they are still pursuing the claim. They took the conservative approach of keeping the R300 million liability on the balance sheet, so FY25 saw quite the mismatch on this issue. For FY26, they’ve now derecognised the liability of R300 million.
This means that the net asset value per share of R1.81 is arguably the cleanest it’s ever been. But it also means that there’s risk of a legal surprise putting a stain on the numbers. Technically, there’s potential for upside from the legal battle as well.
Ghost Bite: The current share price is R0.43, which puts this R920 million market cap fund on a price/book of around 0.25x. It’s trading close to 52-week lows. I’m not blind to how tough things are for consumers right now, but I’m very tempted to buy more.
Hammerson is doing well – and raising capital accordingly (JSE: HMN)
Footfall is growing in busy UK city centres
Hammerson, the UK-focused property fund, has had a very busy few days.
Towards the end of last week, they released results and announced an intention to raise up to £190 million in fresh capital for an acquisition. To give you context, that’s around 10% of existing share capital.
The acquisition in question is a 50% interest in Manchester Arndale, giving the fund exposure to the largest catchment area outside of London. The net initial yield based on the purchase price is 7.8%. This is in line with Hammerson’s strategy to focus on busy city centres where they can achieve growth in footfall, despite the obvious disruption of online shopping.
The placement was structured in such a way that space was made for both institutional and retail investors in the UK. I wish we saw more of this in the South African market. As a strong show of support in the raise, the CEO and CFO signed up for a combined £230k worth of shares.
The capital was raised through the placement of shares at 355 pence per share, representing a 3.8% discount to the closing price on 29 July. That’s a bigger discount than I’ve seen in recent raises by South African REITs, but I think that the UK institutional market is a tougher place to raise capital. South African institutions love throwing money at REITs at almost any price.
Alongside the push to raise fresh capital, Hammerson also released interim results for the six months to June 2026. This is where they reinforced the messaging around strong occupancy rates and growth in footfall in busy cities. Like-for-like net rental income was up 5% and the interim dividend jumped by a juicy 22%.
With the balance sheet in good shape (loan-to-value of 39%) and the portfolio performing well, Hammerson felt confident enough to increase the earnings guidance for FY26 to reflect expected growth of 27%. They have also updated medium-term guidance, with an expected compound annual growth rate (CAGR) in the dividend per share of 6% – 8%.
Ghost Bites: None of this timing is by accident. By waiting for the release of results to trigger the capital raise, Hammerson was able to take fresh (and positive) information to the market.
Hyprop has closed the acquisition of Galleria Burgas (JSE: HYP)
On the other side of this deal, we find MAS (JSE: MSP) as the seller
Back in May, Hyprop announced the acquisition of Galleria Burgas in Bulgaria. As those who follow Hyprop closely will know, the company has interests in Eastern Europe in addition to the South African portfolio of iconic shopping centres.
The underlying property was valued at €122.2 million. Due to the debt in the entity that holds the property, the purchase price of the shares was only €53.5 million. This is essentially the net asset value of the company that Hyprop has acquired.
The seller is MAS, the property company that is making a lot of noise about not really being a property company anymore. MAS has just reconstituted its various board committees. It’s anyone’s guess what assets they will buy going forwards.
Ghost Bite: Hyprop is sticking to its knitting with this deal. Nobody really knows what MAS is up to!
Primary Health Properties lives up to its defensive promise (JSE: PHP)
Despite all the macroeconomic noise, the portfolio is solid
Primary Health Properties has released an important set of financial results. The interims for the six months to June 2026 reflect the combination of this company with the business of Assura. You may remember that merger process how Primary Health had to beat off other potential buyers.
This is why the numbers feature growth rates like 123% in net rental income. This is obviously not the growth being achieved by the assets on a like-for-like basis. In fact, in a share-for-share merger, the quickest way to see this is to compare the total number to the per-share numbers. With HEPS flat for the period and with the dividend per share up by only 2.8%, it’s clear that most of the growth is thanks to the merger.
To be fair, the strategy is built around a defensive healthcare portfolio rather than a fast-growing asset class. It’s been a tricky time in the world, so a modest uplift in the value of the property portfolio is indicative of the assets doing their job. 76% of the group’s rent is funded directly or indirectly by the UK and Irish governments.
Here’s a stat that is fun to compare to South African REITs: the loan-to-value ratio of a developed market property fund. Primary Health Properties has a LTV of 57%, which is a ratio that would send a South African fund into a crisis. But with a weighted average cost of debt of 3.8% in a stable market like the UK, having more leverage on the balance sheet is key to unlocking better returns. I must point out that the target range is 40% to 50%, so they are running a hot balance sheet even by UK standards. Still, South African funds tend to target 30% – 40%.
The corporate finance reshuffling isn’t over, either. Hot on the heels of the merger, they are now looking at establishing a joint venture with an institutional investor that Primary Health would seed with £0.7 billion in private hospital assets. The company would look to act as asset manager, so the idea is to juice up return on equity by generating fee revenue in addition to rentals.
Ghost Bite: This is more of a “get rich” rather than “stay rich” asset, which is why it appeals to institutional investors looking after the interests of income-focused investors. Those with higher risk appetite and a growth mindset would probably look elsewhere on the market.
Stor-Age adds some Xtraspace to its portfolio (JSE: SSS)
There are juicy management fees to be earned as well
Stor-Age has announced the acquisition of 10 Xtraspace properties for R387 million. The portfolio is spread across the Western Cape, Gauteng and KZN.
Importantly, Stor-Age has also locked in a deal to manage a further six Xtraspace properties for an initial period of two years. Xtraspace has been around since 2007 and has 16 properties, so Stor-Age will either own or manage the full Xtraspace portfolio going forwards.
This approach is in line with Stor-age’s recent push to earn more management fees as part of its operating deal.
But what is the magic of management fees?
As all bankers know, it’s about OPM – Other People’s Money. If you are getting paid to manage someone else’s capital, it does wonders for your own return on capital. You’re getting a return without needing to put money down.
In practice, Stor-Age is very much still a capex-heavy landlord. They are just open to opportunities to drive higher returns through management deals as well.
Ghost Bite: It wouldn’t surprise me at all to see Stor-Age acquiring the remaining six properties in years to come. That’s often how these things turn out in the end, unless the owners of Xtraspace are happy to keep their long-term capital tied up in properties that they are no longer managing.
Nibbles:
- Primeserv (JSE: PMV) has very little liquidity in its stock, with an average daily value traded of around R20k. For this reason, the results for the year ended March 2026 only get a passing mention in the Nibbles. The liquidity is a pity, as the business support services group grew HEPS by an impressive 12% despite revenue increasing by only 2%. This R330 million market cap company has seen the share price increase by only 7.7% over 12 months, so the market isn’t paying much attention here.
- Lesaka Technologies (JSE: LSK) announced the details of a new employment agreement with the Executive Chairman, Ali Mazanderani. The agreement takes the parties to June 2029, with Mazanderani committing 50% of his time for an annual base salary of $600k. He’s not eligible for cash bonuses. In addition, he has an employment contract with the South African subsidiary that runs until June 2028, although it may be extended to 2029. This contract pays R5 million per year plus up to R4 million in travel. No other bonuses will be applicable.
- Africa Bitcoin Corporation (JSE: BAC) has found a way to describe itself as the “world’s first bitcoin backed SME growth accelerator”. The word “backed” is working very hard at the moment, as the bitcoin holding is tiny relative to the rest of the balance sheet (R1.5 million out of R512 million). The latest from the company is that they’ve placed new shares and raised R5.5 million in the process. Also, trading in the shares on the Aquis Growth Market in the UK will commence from 17 August.
