Vukile sees return to pre-Covid level of shoppers at centres in SA and Spain
|Published
VUKILE’S potential deals mark a shift among South Africa’s listed property companies, as most REITS have through the pandemic rather disposed of lesser performing assets and conserved cash to reduce debt, rather than buy new centres.
VUKILE Property Fund, the specialist retail REIT, had seen a return to pre-Covid levels at its shopping centres and was acquiring two more in South Africa, CEO Laurence Rapp said yesterday.
Although the group, which is invested in retail in Spain and in regional dominant centres in South Africa, did not disclose the names of the two centres, the potential deals mark a shift among South Africa’s listed property companies, as most REITS have through the pandemic rather disposed of lesser performing assets and conserved cash to reduce debt, rather than buy new centres.
“We operate in the sweet spot in the SA market, with significant exposure to brilliantly performing township and rural shopping centres, where trading densities are up 10.2 percent and 6.9 percent, and footfalls are up 106 percent and 104 percent, respectively,” Rapp said yesterday.
He said that for Vukile, it was the first time in two years that suitable potential acquisitions had become available on the South African market.
Vukile increased funds from operations by 9.5 percent for the year to March 31, and declared a 105.8 cents dividend, while retaining R308 million to fund growth. Earnings and dividend were ahead of guidance.
“We’re very upbeat with the performance. We produced strong results from our South African portfolio and even better in Spain. Property valuations have started to rise in both countries, which shows the excellent quality of the cash flows,” he said.
The balance sheet was robust and growth had been jump-started, he said.
Some 46 percent of Vukile’s R33 billion of assets are held in South Africa and 54 percent in Spain through its 89.6 percent owned Madrid-listed subsidiary Castellana Properties Socimi.
“Tenants in Spain and South Africa in all product categories are reporting good performance, with trading trending upward across the board,” said Rapp.
In the SA portfolio, vacancies were at 2.6 percent, the tenant retention rate at 93 percent, and 100 percent of billings were being collected. Turnovers had surpassed pre-Covid levels. The South African property values increased by 4.6 percent.
Castellana had vacancies of 1.6 percent, positive rental reversions of 3.1 percent and a rental collection rate of 98.7 percent. Retail sales exceeded 2019 levels.
Footfalls in Spain had finally breached the pre-Covid level in April, a month after year-end.
As part of asset rotation, R800m of non-core assets in SA were sold. Vukile also received R700m in cash from selling 64 percent of its stake in its Namibian portfolio and sold R500m of Fairvest shares after the Arrowhead merger.
Castellana sold non-core office assets for €26m (R410m) in Spain. The combined proceeds were largely rotated into Castellana’s acquisition of a 21.7 percent shareholding in Lar España for some €100m.
Lar España and Castellana were both specialist retail property investors, but in different areas of the country giving Castellana exposure to the entire Spanish peninsula, he said.
“Vukile is engaging with Lar España to understand their strategies and explore ways to reduce its discount to net asset value,” said Rapp.
This year Vukile concluded its first green loan with Nedbank CIB, which would fund 19 solar energy projects and energy-efficiency initiatives in SA. To date, Vukile had installed 14.2 MWp in solar photovoltaic (PV) power systems through 21 different projects, and it planned another 7.4 MWp of solar by end-March 2023 and to increase its sustainable energy consumption by at least 50 percent over the next three years. Castellana was also preparing to add PV capacity.
BUSINESS REPORT