Johannesburg - Listed property fund Vukile expects to make an announcement within the next two to three months about the company’s entry into the residential property market.
Laurence Rapp, the chief executive of Vukile, said yesterday that it currently had a memorandum of understanding with a national player in the residential market.
“It’s currently under due diligence and we are not at liberty at this stage to discuss the nature of the deal or what partner it would be,” he said.
Rapp said the initial target was for residential to comprise about 10 percent of the total portfolio but it could increase thereafter.
He stressed the company’s entry into the residential property market excluded student accommodation. Rapp said Vukile liked the residential property market because it exhibited strong underlying demand fundamentals, urbanisation was increasing, rising interest rates typically made it more expensive for people to own than to rent and the rental fundamentals were quite strong in the market.
“We are looking to get into the lower- to middle-income segment in the country.”
Rapp said further key themes in Vukile in the six months ahead included the internationalisation of the fund and the disposal of assets.
Internationalisation
He said they would be looking to exit Vukile’s sovereign portfolio, which was valued at about R900 million, and certain office and industrial assets to reduce the fund’s exposure to non-retail assets.
Rapp said the capital raised through these disposals would be recycled either into the residential or offshore markets, the local retail market or used to repay term debt when it matured.
He said Vukile had made its first international investment after the six-month reporting period to September by acquiring a 21 percent stake in Atlantic Leaf, which has a listing on the Stock Exchange of Mauritius and a secondary listing on the JSE’s AltX and has a portfolio of industrial properties in the UK valued at £163m (about R3.5 billion).
He said the reason Vukile wanted to internationalise was because the economic prospects in some of the developed markets were more attractive than in South Africa, which was currently a tough economic environment.
Vukile yesterday reported 7 percent growth in distributions a share to 63.222c in the six months to September from 59.086c in the previous corresponding period.
This was in line with its market guidance of distribution growth of between 7 percent and 8 percent.
But Rapp said Vukile had some “bad luck” and had picked up some historical council billing inaccuracies and had to create a provision of about R12m. Shares in Vukile dropped 0.28 percent yesterday to close at R18.10.
BUSINESS REPORT