October 1 2026 11:30
HOUGHTON, SOUTH AFRICA
On Tuesday, JSE-listed retail specialist landlord Vukile Property Fund (JSE: VKE) released a pre-close market update, it reaffirmed its guidance of 8% to 10% growth in funds from operations (FFO) per share and 10% to 12% growth in dividends per share for the year to the end of March 2027.
Its update covered trading for the first five months of the year (April to end-August 2026) ahead of the half-year close on 30 September..
CEO Laurence Rapp said operating and trading metrics were robust in South Africa and Iberia. Vukile owns investments in SA, Spain, Portugal, Madeira and Italy.
This is the first pre-close since Vukile completed its entry into Italy in June 2026, when it bought a €115m portfolio of three shopping centres and created a new Italian platform, Esperia Properties. It is also the first time the group has reported on three distinct operating platforms: the South African retail portfolio, Castellana Properties in Spain and Portugal, and Esperia in Italy.
Splau Shopping Centre, Barcelona Spain
The key numbers from the update:
- Guidance: FY27 FFO per share growth of 8% to 10% and dividend per share growth of 10% to 12%, reaffirmed despite a stronger rand.
- South Africa: like-for-like net operating income (NOI) projected to grow 8.5% in FY27, vacancies stable at 1.9%, renewal reversions improving to +4.0% and trading density up 5.0%.
- Spain and Portugal: sales up 3.9%, Bonaire footfall up 19.5%, record footfall in Portugal of over 15 million visits, and average rental increases of 6.79% on 104 leases signed.
- Italy: occupancy of 97.9%, rolling 12-month footfall up 2.3% to 9.5 million visits and sales up 3.2%.
- Pipeline: two further Italian assets under due diligence and expected to close in the first quarter of 2027, with funding already in place, plus exclusivity on another asset.
Vukile has stuck to its numbers. Management said it remains confident of delivering funds from operations (FFO) per share growth of 8% to 10% and dividend per share growth of 10% to 12% for FY27. That is the same range first published in May 2026, when the group confirmed 9.3% FFO and dividend growth for FY26 and set out its outlook for the year ahead.
With close to 70% of its assets now in Europe, Vukile’s rand-reported earnings are sensitive to the euro exchange rate. When it published its FY26 results in June, the group based its guidance on a forecast exchange rate of R19.60 to the euro and flagged that the guidance already allowed for a strengthening of the rand relative to the prior period.
The rand has since firmed beyond those assumptions. In the pre-close presentation, Vukile acknowledged this, saying the group had performed in line with expectations and was comfortably within its projected earnings growth range despite the rand being stronger than budgeted. In other words, operational outperformance across the portfolios is currently absorbing the currency headwind.
The gap between FFO growth (8% to 10%) and dividend growth (10% to 12%) is also worth highlighting. Dividends were guided to grow faster than underlying earnings, which points to a higher payout ratio in FY27. For yield-focused shareholders, that is an attractive feature, although it naturally leaves slightly less room for retained earnings to fund growth internally.
Vukile did not change its guidance at this update, and the market should expect any revision to come with the interim results. Those are scheduled for release on or about 26 November 2026.
South Africa: township and rural centres keep leading
Vukile’s South African retail portfolio continues to deliver, with management saying overall metrics are tracking in line with budget. Like-for-like NOI is projected to grow 8.5% in FY27. That is below the exceptional 10.3% achieved in FY26, but still a strong number from a high base, driven by sustained high occupancy, additional solar PV, water and utility savings and operating cost efficiencies.
Total portfolio net operating income (NOI) was expected to rise 10.0% in FY27, up from 8.8% in FY26. This figure included the acquisitions of Chatsworth Centre in KwaZulu-Natal and Botshabelo Mall in the Free State, and the disposal of Durban Workshop.
| Metric | Aug 2026 | Mar 2026 | Sep 2025 |
|---|---|---|---|
| Vacancies (% of GLA) | 1.9% | 1.7% | 1.8% |
| Renewal reversions | +4.0% | +3.7% | +2.5% |
| Cost-to-income ratio | 12.2% | 12.4% | 12.5% |
| Trading density growth | 5.0% | 5.2% | 5.4% |
| Tenant retention | 91% | 89% | 90% |
| Rent collection rate | 101% | 101% | 102% |
| Average base rental (R/m²) | 191.30 | 189.41 | 183.15 |
Trading was healthy across the board, Vukile said. Portfolio sales rose 5.1% year on year, and all 14 retail categories grew their trading density. Township centres (+4.7% sales growth) and rural centres (+5.3%) continue to outperform, with commuter centres delivering the strongest trading density growth at 7.3%. Standout assets include Queenstown’s Nonesi Mall, where spend per head grew 12.4%, Atlantis Shopping Centre (+8.1%) and Highland Mews (+8.4%).
Leasing activity shows real pricing power. Vukile signed 283 leases covering 50,970m² and R475 million in new rent. Renewals were concluded at an average reversion of +4.0%, while new leases achieved rental growth of +7.0%. The group’s top 10 tenants, who account for 55% of GLA, renewed around 12,000m² and expanded by a further 2,000m², a strong vote of confidence in the portfolio.
Vacancies remain tight at 1.9%, or 1.3% excluding retail offices. Rent collection held at 101%, and outstanding balances have fallen 42% since March 2026 to R16.9 million. Management did note immediate-term inflationary pressure on consumers, but so far it has not dented tenant demand.
Spain and Portugal: Bonaire’s comeback and a record for Portugal
Castellana Properties, Vukile’s Madrid-listed Iberian subsidiary, had what management called an excellent start to the year. The standout story is Bonaire in Valencia, where footfall jumped 19.5% and sales grew 7.5%. Vukile described this as evidence of the centre’s full recovery and renewed momentum.
In Portugal, footfall exceeded 15-million visits between April and August 2026, the strongest performance ever recorded for that five-month period. Forum Madeira, acquired in 2025, and Alegro Sintra led the Portuguese portfolio with sales gains approaching 5%. Across the Castellana portfolio, sales rose 3.9%, with growth in every key category, led by leisure and entertainment (+9.4%), fashion (+4.9%), health and beauty (+4.8%) and food (+4.6%).
Leasing in Iberia continues to produce strong rental uplifts:
| Spain | Portugal | Castellana total | |
|---|---|---|---|
| Leases signed | 69 | 35 | 104 |
| GLA signed (m²) | 28,200 | 13,391 | 41,591 |
| New rent signed | €7.1m | €3.4m | €10.5m |
| Average rental increase | 7.49% | 5.15% | 6.79% |
| Vacancy | 1.0% | 1.7% | 1.1% |
| Rent collection | 98.8% | 98.2% | 98.7% |
Renewals across Castellana were signed at an average of 5.83% above previous rentals and new contracts at 9.94%, both before CPI indexation. Occupancy and collections remain at industry-leading levels. The Spanish assets bought at the start of FY27, Islazul in Madrid, Splau in Barcelona and Berceo in Logroño, have been fully integrated into the operating platform.
Italy: Early days for Esperia
This pre-close gave investors their first look at Esperia Properties, the Italian platform Vukile built in June 2026 around three shopping centres: Le Centurie in Padua, Quarto Nuovo and Le Due Valli. Because the portfolio has only been owned for a few months, the figures largely reflect the assets’ historical trading baseline. Management said the platform is trading in line with its original underwriting.
On a rolling 12-month basis to August 2026, the portfolio recorded 9.5-million visits, up 2.3%. Quarto Nuovo led with 4.6-million visits (+3.5%). Total sales grew 3.2%, with all three centres in positive territory. Like-for-like sales growth was a more modest 0.8%. Occupancy stood at 97.9% across 41,021m² of GLA, with an average sales density of €3,728/m².
Early leasing under Vukile’s ownership is encouraging. Eighteen leases were signed over 2,736m², with new contracts achieving a 16.26% rental uplift. Renewals were slightly negative at -0.80%. The one area flagged for attention is rent collection, which sits at 92% for the portfolio. Vukile said collections will be a focus for the year ahead.
Capital allocation
Vukile has been one of the most active property funds on the JSE over the past two years.
The status of the pipeline by market:
- Italy: two assets previously referenced are under due diligence and are expected to close in the first quarter of 2027. Funding for this transaction is already in place. Vukile has also secured exclusivity over another asset.
- South Africa: a number of potential acquisitions are under evaluation.
- Spain: several transactions were evaluated and declined, either on price or because they lacked strategic fit.
Rapp said Vukile wants to replicate its Castellana playbook to build Esperia, and sees the potential to grow it into a portfolio of more than €500m over time. With an initial €115m portfolio in place and two more assets in due diligence, the build-out is under way.
Vukile has the balance sheet to do it. In May 2026, it raised R2.8bn through an accelerated bookbuild at R22.60 per share, partly to fund its Italian entry and partly to give it flexibility to act on further opportunities. It ended FY26 with close to R8bn in liquidity. It also recently raised R1.1bn in an oversubscribed debt auction.
The decision to pass on Spanish deals is a meaningful signal. Spain was the engine of Vukile’s growth in FY26, with €902m of transactions executed, including Islazul, Splau and Berceo. Walking away from further assets on price suggests competition for dominant Spanish shopping centres has intensified, and that Vukile is unwilling to dilute returns to keep growing there.
Management summed up its approach under three themes: robust operational performance, integration supporting growth, and disciplined capital allocation. Strategic acquisitions, disposals and portfolio recycling have, it said, increased the group’s “exposure to dominant shopping centres in its core markets”.
Vukile is expected to release interim results for the six months to 30 September 2026 on or about 26 November 2026.
247@propertyflash.co.za
