November 29 2023
For the first time in a few years landlords are putting some high-quality low vacancy shopping centres up for sale, Laurence Rapp, CEO of Vukile Property Fund, said on Wednesday. While it may be challenging to buy many of these retail assets given the cost of finance and high interest rates, there still are assets worth about R5bn looking for buyers. Vukile invests in shopping centres in SA, Spain and Namibia.
Rapp spoke at a media presentation following the release of financial results for the six months to end-September 2023. Property Flash has found that groups have got through the Covid-19 pandemic and are now either looking to expand through acquisitions or disposing of assets to refine their portfolios or because they need cash.
Vukile however was more likely to acquire new assets in Spain rather than at home. This was while deals were accretive in the Iberian country and dilutive in South Africa.
Vukile reported a 10% increase in its cash dividend to 52.1 cents per share for the six months to end-September 2023 and 5.2% growth in its funds from operations to 85.0 cents per share.
As much as 59% of Vukile’s R39bn asset base is in Spain. It owns 99.5% of Madrid-listed subsidiary Castellana Properties Socimi. Almost 50% of Vukile’s earnings in the reporting period were in Euro, and Vukile’s results were enhanced by the Rand hedge nature of its earnings. Vukile has increased its full-year 2024 financial year growth guidance for funds from operations per share to between 4% and 6% and dividend per share to between 8% and 10%.
“Vukile has sustained strong operational results and positive trading metrics in both our South African and Spanish portfolios and our balance sheet strength is supported by robust credit metrics. We have prove to be a resoundingly strong, sustainable business through some truly torrid times. Vukile has consistently and significantly outperformed the South African Listed Property Index (SAPY) over a 10-, five-, three- and one- year period. We are confident that we will deliver on our increased guidance,” Rapp said.
In terms of its domestic portfolio, Vukile achieved like-for-like net operating income growth of 5.1%. This portfolio is comprised of shopping centres in townships and rural areas. Vukile’s domestic portfolio grew 3.9% in value over the period. Vacancies remained low at 2.0% and excluding office space within retail properties, this figure decreases to 1.3%. Rental reversions rebounded from negative 2.4% to positive 2.4% and 86% of leases reverted flat or positively. Vukile’s local malls saw a 3.9% in trading densities.
Vukile reports increased demand for retail space
Vacancies are low due to space take-up and rents are growing
29 NOVEMBER 2023 – 09:50
UPDATED 29 NOVEMBER 2023 – 16:00
by DENISE MHLANGA
Vukile Property Fund recently expanded and upgraded Daveyton Mall in Benoni. Picture: SUPPLIED
Vukile Property Fund says its SA and Spanish portfolios continue to experience high demand for retail space, resulting in reduced vacancies and rising rentals.
Its SA portfolio recorded like-for-like annualised net operating income growth of 5.1%, with vacancies at 2%. Rental reversions improved to 2.4% from a negative 2.4%, with annualised trading densities increasing 3.5%.
The Spanish portfolio recorded normalised net operating income growth of 13% and 1% vacancies; positive reversions of 8.3% (11.6% indexation) with 95% of its retail space let to international and national brands.
“Vukile’s strategy of owning dominant assets in their catchment areas and operational focus on the consumer as the source of value creation, has become our differentiator in driving performance,” said CEO Laurence Rapp.
Rapp said a highlight for the six months to end-September has been the strong positive reversions outcome in the past five years. As a result, demand for space is high and vacancies remain low with steady growth in base rentals.
Vukile is a JSE-listed retail-focused real estate investment trust (Reit), differentiated by its sector specialisation and international diversification. Its retail assets in SA and through its 99.5% held Madrid-listed subsidiary, Castellana Properties Socimi, is valued at R39bn. About 60% of its assets are in Spain and nearly 50% of its earnings in euro.
Vukile’s SA portfolio includes 33 commuter, rural, township and urban malls valued at R15.4bn. It owns East Rand Mall and Daveyton Mall in Gauteng, Hammarsdale Junction, Phoenix Plaza, KwaMashu Shopping Centre and Pine Crest in KwaZulu-Natal.
Vukile signed 266 lease renewals and 81 new leases as many national and independent retailers increased occupancy within the portfolio.
In its Spanish portfolio, which is 95% let to top-tier international and national retail tenants, normalised net operating income grew 13.0%. Vacancies sat at 1%. Rental reversions gained 8.3% and including inflation adjustments, rose 11.6%. Castellana’s 26.29% investment in Lar Espana, a Spanish real estate investment trust, performed well with a 12% dividend yield. Spain was outperforming the eurozone and employment was at its highest level since 2008, CEO of Castellana, Alfonso Brunet said. Households were both saving and spending more, indicating fiscally responsible consumers, and that was being helped by growing international tourism. More than 80-million people visit Spain each year, close to twice the country’s population.
alistair@propertyflash.co.za
