South Africa’s largest shopping centre, Fourways Mall, is in serious financial trouble with a high vacancy rate and declining fair value.

It has reached such a dire state that Accelerate Property Fund (APF), which owns 50% of Fourways Mall, had to raise money to address its challenges.

Fourways Mall was revamped and expanded in 2019, which increased its gross lettable area (GLA) from 61,634 square meters to 88,785 square meters.

The owners were upbeat about its prospects because of its excellent location and a great track record.

However, it did not produce the expected results. The number of vacant shops became a headache for the owners and the mall lost its lustre.

From 2021 to 2023, Fourways Mall’s vacancy rate increased from 3% to 8%, and this trend seems to have continued.

As a result, Fourways Mall’s net rent per square meter has significantly deteriorated – from R298 in 2020 to R262 in 2023.

The net rent refers to the income the company generates from the property after all property expenses are deducted.

Even more striking is that Accelerate’s latest financial results revealed that its gross rent, before expenses, for 2024 was R223, much lower than its 2023 net rent of R262.

This points to a property which is in distress and needs urgent intervention to turn things around.

The high vacancy rate and declining rent per square meter have resulted in a big decline in the property’s value.

Since the 2020 financial year, the first reporting period since the mall expansion, the mall has suffered several downward fair value adjustments.

Asset fair values are reduced when performance suggests they are worth less than what is reported in the company’s books.

Accelerate has been forced to reduce its 50% stake in Fourways Mall by R900 million over the past four years, from a value of R4.8 billion to R3.9 billion today.

The charts below, using Accelerate Property Fund’s latest financial results, show Fourways Mall’s financial challenges.

Fourways Mall hurting its owners

Accelerate owns 50% of Fourways Mall. The remaining 50% is owned by Azrapart Proprietary, which is indirectly owned by Accelerate director and shareholder Michael Georgiou.

In its 2024 financial results, Accelerate Property Fund said its expected credit losses increased significantly due to bad debt write-offs and increased provisions, especially in Fourways Mall.

The mall’s challenges have also significantly impacted Accelerate Property Fund revenue over the last four years.

Accelerate’s total revenue has experienced a continuous downward trend since the mall opened its doors.

From 2019 to 2024, the property manager has seen its revenue tumbling from R1.2 billion to only R819 million.

Over the last five years, Accelerate has recorded significant losses that have placed tremendous pressure on the company.

Michael Georgiou has also faced financial issues, which resulted in Investec becoming a major shareholder in Accelerate.

On 21 May 2024, Accelerate released a SENS announcement that Investec had acquired a beneficial interest in the company’s shares.

It said the acquisition was pursuant to a lending arrangement and that Investec now owns 8.02% of the company.

Shortly after this announcement, Accelerate announced that its director, Michael Georgiou, sold 107 million of the company’s shares at an average price of 53 cents.

While no additional information was provided on why these shares were sold, it can be assumed that Investec acquired Georgiou’s shares linked to a lending transaction.

In other words, Georgiou defaulted on a loan to Investec, and, as a result, Investec acquired over 8% ownership of Accelerate Property Fund.

The charts below show Accelerate Property Fund’s performance over the last five years.

Turnaround plan

The Fourways Mall co-owners have launched a new strategy to reestablish it as a top-tier shopping destination.

It includes partnering with Flanagan & Gerard as the strategic asset managers and Moolman Group as the property managers.

The plan is to improve signage for seamless navigation, introduce new tenants, and deploy backup power solutions.

It further wants to improve security through better parking area lighting and upgraded security measures.

The plan also includes optimising traffic flow, enlarging parking bays, and revitalising the surrounding area.

It is starting to take shape. Last month, Fourways Mall announced a new taxi holding area to alleviate road congestion and offer commuters quick and safe access.

This improvement is aimed at managing traffic flow inside and outside the Fourways Mall, which has been problematic.

The underground commuter court was built as part of the expansion project that opened in September 2019. It is located on the basement level, under Pick n Pay.

This transportation hub has now been expanded with an additional taxi holding area, providing a comfortable and convenient environment for taxi drivers and passengers.

It offers two direct access points into the mall, the inclusion of a safe walkway between the taxi rank and drivers’ holding area, and added speed bumps in the area.

The commuter court includes retail offerings, Roots Butchery and Restaurant, Real Fish and Chips and Arthur Ford.

“The secure and convenient movement of our consumers in and out of the mall is paramount to us,” says Paul Gerard, managing director of Flanagan and Gerard.

Fourways Mall taxi area