Vukile has positioned itself to make it more difficult for the listed property loan stock company to become an acquisition target and rather an acquirer in the anticipated further consolidation of the listed property sector through mergers and acquisitions.
Laurence Rapp, the chief executive of Vukile, said last week that the group was positioned for corporate activity.
Its market capitalisation had risen close to R8 billion, it had great liquidity in its shares and it had the capacity because it had deliberately done a R5bn bond programme, of which it had tapped only R1bn, to give it access to the debt capital markets when needed.
Rapp noted that Vukile was looking at all available opportunities but stressed there was not any immediate corporate activity in the pipeline.
Vukile was also not going to be positioned as a hostile takeover company, he said.
Rapp said Vukile’s property portfolio was valued at about R7.6bn and its initial target was to grow the value of the fund to R10bn, which would “be done over the next two to three years, if not sooner”.
He admitted Vukile had been the target for acquisition prior to his appointment as chief executive a year ago, but this had dissipated. The identity of the entity that expressed interest in acquiring Vukile has never been disclosed.
Rapp said Vukile had been vulnerable to an acquisition because Sanlam controlled about 54 percent of its shareholding either directly or through a black economic empowerment entity.
He said this was never a strategic holding and the only defence Vukile had was to keep delivering results and to dilute Sanlam’s shareholding, which was its biggest Achilles heel.
He added that the group had been able to get the timing linked between the broader transaction, in which Vukile acquired an R1.5bn portfolio from Sanlam and the Public Investment Corporation (PIC) acquired a stake in the company.
Sanlam’s stake in Vukile fell to less than 6 percent, largely through the sale of 70.2 million linked units to the PIC.
Rapp said the PIC was currently the largest individual shareholder in Vukile, with a 20 percent stake, and it did not have a dominant shareholder that could facilitate a deal.
“So I don’t believe we are particularly vulnerable at the moment,” Rapp added.
Vukile was committed to remaining a diversified fund but with a special emphasis on the retail sector. The company has given notice it would be exploring acquisitions of retail centres and joint venture development opportunities.
It is also disposing of many of its central business district (CBD) office buildings, which it regards as higher risk.
Rapp said the acquisition of the Sanlam portfolio diluted the retail component of its portfolio to 47 percent from 53 percent although it was now back at about 50 percent.
He said sales of CBD offices worth a total of about R302 million were part of the exercise to rebalance Vukile’s portfolio.
Rapp added that planned additions to its retail portfolio, including the Hammarsdale centre at R194m and two joint venture developments would add retail properties worth about R300m to its portfolio.
He said management wanted to grow Vukile’s exposure to industrial property, while in the office market it would only look at “fantastic deals in specific nodes that really up the quality of the portfolio”.
Last month Vukile received the overall 2012 Investment Property Databank Direct Property Investment Award after it achieved a 17.5 percent total return across its property portfolio, compared with an overall benchmark return of 10.9 percent.