Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

The Cherry Lane deal has popped for Accelerate (JSE: APF)

But more importantly, there’s a Category 1 transaction linked to related party debt

Accelerate Property Fund has been on a mission to improve its balance sheet through a combination of capital raising and capital recycling activities. “Recycling of capital” is just a fancy term in the property sector for selling properties that are currently in the portfolio and turning that value into cash which can either be deployed into other properties or used to reduce debt.

Unfortunately, the plan to recycle the capital in Cherry Lane Shopping Centre has hit a snag. The deal to sell it to QSPACE has fallen through. Accelerate is in discussions with other potential buyers, but no agreement has been reached at this stage.

Now that the easy update is out of the way, we get to the more technical one. There has been an awkward situation for a while at Accelerate regarding a dispute around the Fourways Mall Shopping Centre, with the ex-CEO of Accelerate in a conflicted position as he sits on both sides of the claim. Michael Georgiou was CEO until April 2023 and is now on the board of the listed company as a non-executive director.

There are various other parties involved as well. On top of that, there are many related party balances linked to various transactions, as you’ll see below.

There are a number of complexities here, with the high-level summary being that after a few cessions of debt and other calculations, an entity called Azrapart owes R797 million to Accelerate.

That’s not all folks, as Accelerate previously intended to settle a debt to Azrapart of R300 million in cash. Due to liquidity constraints at Accelerate, the parties agreed to go off and find other ways to settle everything.

The solution? Well, there are a few steps to it.

Azrapart accepts payment of R300 million plus R71 million in time-related charges as full and final settlement of the “rebuilt claim” that Azrapart has against Accelerate, in exchange for settlement against the balance owing on Azrapart’s debt to Accelerate.

Furthermore, Accelerate will purchase bulk related to Fourways Mall from Azrapart for R74.7 million, also set off against the debt.

There’s also a transaction related to the internalisation of the management company and the termination of the existing management agreement, which leads to roughly R110 million being owed by Accelerate to Azrapart. At this point you get no prizes for guessing that the amount is set off against the loan.

As part of the headlease termination agreement, Accelerate would owe an amount of R395 million to Azrapart. Again, this is being set off against the debt.

Now, the maths is not quite mathing here by my calculations, but there are many parties involved and I suspect that parts of these claims might be owed to some of them.

The announcement explicitly says that the loans will be 100% set-off by the various steps with no cash outflow from Accelerate, so that’s the overall summary of these transactions. Thankfully, there will be a Category 1 circular released that will include further details on all the steps, at which point the maths will be clear.

The Accelerate share price remains a sad story vs. pre-pandemic levels:

Going back further is even worse unfortunately, as this stock was trading well above the R6 mark during the property bubble on the JSE from 2014 – 2017.

Please note: an earlier version of this update erroneously referred to Michael Georgiou as the current CEO of Accelerate Property Fund. My apologies for this.

Little Bites:

• Director dealings:
  • A director of Afrimat (JSE: AFT) sold shares worth just over R1 million.
  • A director of Stefanutti Stocks (JSE: SSK) bought shares worth R679k.
  • A director of Omnia Holdings (JSE: OMN) sold shares worth R281k.

• To give you an idea of where the liquidity is for Tharisa (JSE: THA), the company announced the share buyback activities for the week ended 5th July. They repurchased only 11,695 shares on the JSE vs. 329,041 shares on the London Stock Exchange.

• If you are a shareholder in Datatec (JSE: DTC), then take note that the company has released the 30-day VWAP for the calculation of the scrip dividend alternative.