Accelerate Property Fund has acquired roughly half of the Portside office building, the tallest skyscraper in Cape Town, which houses banking group FirstRand’s regional head office in the central business district (CBD).
Accelerate, which listed on the JSE in late 2013, is rolling out an aggressive growth plan that has included some significant office acquisitions. The fund said on Monday that it had entered into a binding agreement with Old Mutual Life Assurance Company “to acquire the letting enterprise conducted in certain sectional title units in the sectional title scheme known as Portside”. Old Mutual effectively owns half of the building, Accelerate chief operating officer Andrew Costa said.
The acquisition consideration was R840m plus value added tax (VAT). Old Mutual would provide Accelerate with a rental guarantee amounting to R120.1m plus VAT.
Accelerate was entitled to use the rental guarantee at its sole discretion, which was intended to bridge any shortfall in rental income that may arise from vacancies. In addition to the rental guarantee, Old Mutual would pay R35m plus VAT to Accelerate as a contribution towards tenant installations, over and above the existing structures in place.
“Effectively Old Mutual owns 50% of the Portside. FirstRand owns the other half and we are acquiring Old Mutual’s half,” Mr Costa said.
He said the deal was opportunistic given that Accelerate was committed to acquiring a top-end retail portfolio.
“We remain a fund that has a focus on retail assets but we take up good and unusual opportunities like this when they arise.”
Accelerate owns offices valued at R1.766bn. The fund, meanwhile, has retail assets of R5.573bn and industrial properties valued at R281m. Portside is located in a prime location in the emerging financial district on the Foreshore and straddles a city block. It is the tallest building in Cape Town, at 139m. It has more than 57,000m² of office space and 1,444 parking bays. Accelerate is acquiring 27,900m² of this total space.
Keillen Ndlovu, head of listed property funds at Stanlib, said the deal was well-structured. “It looks like Accelerate have structured and packaged the deal well. The pricing and assumptions sound reasonable for this iconic asset. The building will not be filled overnight but rental guarantees give some comfort as well as the fact that management understand the Cape Town CBD market well.”