Vukile assets shared between SA, Spain
CAPE TOWN – Vukile Property Fund rose more than 2 percent on the JSE on Monday after the retail-focused real estate investment trust lifted its dividend 3.5 percent to 80.84 cents a share for the half-year to end September 30.
The group said that the dividend was in line with its market guidance.
Chief executive Laurence Rapp said the results reflected a strong performance from its Spanish portfolio together with a continued solid showing from its South African shopping centres, even in a stalled economy.
The results extended its track record of unbroken growth in dividends into its sixteenth year.
Dividend growth of 3 to 5 percent was anticipated in the 2020 financial year.
“Vukile’s strategy, retail sector specialisation and strong operational emphasis is paying off,” said Rapp.
Vukile has R35 billion worth of assets, 48 percent of whom are in Spain through its 82.5 percent held subsidiary Castellana Properties. It provides rand-denominated income streams for shareholders generated from property assets in one of Europe’s strongest economies.
Vukile’s diversification means its assets and future earnings were split almost equally between Southern Africa and Spain.
With its employment growth and an A-grade credit rating with stable outlook, Spain is contra-cyclic to SA, giving Vukile rand hedge qualities, said Rapp.
Now the eighth biggest Reit in Spain by market capitalisation and seventh largest retail landlord by lettable area, Castellana is well established in that market.
Castellana increased net asset value by 3.1 percent and saw good deal flow and growth opportunities. “Its business model continues to grow base rentals and scale up value in an environment that isn’t over-retailed,” said Rapp. Castellana’s assets topped €1bn (R16.13bn) after the acquisition of the 30 000m² Puerta Europa shopping centre in Algeciras, Cadiz.
It also invested €37 million in El Corte Ingles big-box units and was redeveloping them. The 12-month project at Los Arcos, Bahía Sur and El Faro shopping centres was more than 80 percent pre-let and should be completed in September 2020.
A strong operational performance in Spain reduced vacancies to 1.4 percent, with positive rental reversions up 6.7 percent, and 21 percent rental growth on new leases.
Vukile’s Southern African portfolio of shopping centres delivered a strong performance, despite a distressed operating environment. “The defensive nature of our grocery-anchored shopping centres, which mostly sell everyday goods to everyday South Africans… is serving us well,” said Rapp.
Tight focus and new internal structures helped reduce vacancies to 2.8 percent, retain 82 percent of retail tenants and gain like-for-like net property income growth of 6.1 percent.
It’s internalised leasing team is building closer relationships with retailers and, actively engaging second-tier nationals, it introduced 92 new brands to the portfolio in six-months, thereby enhancing the overall customer experience through expanded choice.
Vukile completed a portfolio-wide building assessment to produce a five-year capital expenditure plan that would see it invest R70m per annum to maintain its SA assets.
Vukile’s R516m acquisition of Mdantsane Mall in the Eastern Cape, which transferred in November, had extended its geographical footprint and its foothold in South Africa’s high-density township retail market.
Vukile had partnered with AWCA Investment Holdings to form a black-women-owned-and-managed property asset management company, which would start by managing Mbako Property Fund.
Mbako had acquired Vukile’s R700m remaining non-retail property assets as its initial portfolio.
Vukile shares closed 2.49 percent higher at R20.19 on the JSE on Monday.