Roy Cokayne
VUKILE is to lighten its weighting in the commercial office market and is investigating the possibility of broadening its horizon into the residential property market, student accommodation and health care.
But Laurence Rapp, the chief executive of the listed property company, stressed yesterday it was not stating yet that it would be entering these markets.
Rapp said Vukile would look at lightening the 22 percent weighting of commercial offices in its portfolio by increasing the weighting of its retail portfolio, looking at the conversion of some of its offices to residential and selling some of its smaller office properties.
Rapp said Vukile had an R1 billion acquisition pipeline of strategic properties and would be pursuing its offer to acquire the remaining shares in Synergy Income Fund it did not already own.
He said all the acquisition deals had been signed and were subject to a due diligence and Competition Commission approval but would be closed out in the next three to six months.
They included a R320m investment to acquire an 80 percent stake in the 31 653m2 Moruleng Mall in North West; a R140m investment in the 15 000m2 Batho Plaza in Soshanguve; a R360m investment in the 27 700m2 Nonesi Mall in Queenstown; and R127m in a portfolio of industrial warehouse buildings in Silverton in Pretoria.
Rapp said part of Vukile’s strategy was to increase the weighting of retail in its portfolio, with lower-income group retail a particular focus.
He said Vukile remained steadfast it would not overpay for Synergy shares or management company. If Vukile’s offer was accepted, it would also close this transaction in the next three to six months but would “wait it out” if the offer was not accepted.
Rapp stressed Synergy could not grow from where it was because it could not take on more debt. Vukile acquired an initial 34 percent shareholding in Synergy a year ago and a further 6 percent earlier this month, which triggered a mandatory offer to all the remaining shareholders.
Vukile currently has a portfolio of 79 properties valued at R10.58bn. Synergy has a portfolio valued at about R2.4bn, which together with the Vukile acquisition pipeline, will increase the total value the portfolio to about R15bn if all the proposed transactions proceed.
Rapp said introducing the Synergy portfolio into Vukile would increase the retail assets in its portfolio to R8.1bn or 62 percent of the portfolio, with R9bn in lower income group retail.
Vukile yesterday reported a 7.8 percent growth in normalised distributions a linked unit to 59.1c in the six months to September from 54.81c in the previous corresponding period.
Like-for-like net property revenue grew by 7.9 percent. Vacancies decreased to 5.4 percent from 5.4 percent. Tenant arrears rose by R5.6m to R38.2m in the reporting period, with the doubtful debt allowance increasing by R5.8m to R17.1m. Rapp said the doubtful debt allowance was expected to be about 1.1 percent of gross rental income for the year, which was slightly higher than the 1 percent previous impairment allowance.
Vukile expects to deliver full year growth in distributions of between 7.5 percent and 8 percent. Vukile’s shares ended the day 0.05 percent down yesterday at R18.19.