Johannesburg - JSE-listed Vukile is exploring “compelling” international opportunities.
Laurence Rapp, the property fund’s chief executive, said yesterday that Vukile was devoting a lot of energy into exploring opportunities in various European markets and other jurisdictions to take advantage of better property fundamentals.
Read: Vukile: R400m raised through book build
“We’re targeting investments that are more than currency plays, where we can access a lower cost of funding, healthy net property margins, good growth prospects and long-term stable leases,” he said.
Acquiring
Vukile launched its international investment aspirations by acquiring a 26.1 percent stake in AltX-listed Atlantic Leaf Properties in August for R760 million.
Rapp said the benefits available in opportunities it was exploring in various European markets and other jurisdictions were inherent in the Atlantic Leaf portfolio.
Atlantic Leaf holds an about £264m (R6 billion) defensive real estate portfolio in the UK, focused largely on single-tenanted industrial and office assets with a long lease expiry profile of about 13 years.
“This adds to the defensive nature of the Vukile portfolio,” he said.
Rapp said the local market was sluggish and there were few domestic investment prospects Vukile was evaluating because pricing did not match the cost of capital.
However, Vukile boosted its retail portfolio in the year to March by acquiring four shopping centres for R1.2bn and significant stakes in two regional mall developments for R600m.
It acquired the trading shopping centres of Batho Plaza, Bedworth Centre, Nonesi Mall and an 80 percent stake of Moruleng Mall.
Vukile also acquired a 33 percent holding in Thavhani Mall and 25 percent of Springs Mall, both under development by retail property developer Flanagan & Gerard Property Development & Investment.
It also invested R654m in upgrades and redevelopments and disposed of five properties for a total of R270.9m.
Vukile owns 104 direct property assets valued at R15.6bn and has assets of R16.7bn and is fast becoming a specialist retail focused property fund, with retail centres now comprising 70 percent of its portfolio.
Rapp said Vukile would continue to invest in its core retail sector and its goal was to craft its direct South African assets into a specialist retail property fund. The proposed transaction between Vukile, Arrowhead Properties and Synergy Income Fund had the potential to further this goal significantly.
If this transaction proceeds as envisaged, Vukile’s retail assets will increase to 92 percent of its portfolio.
Vukile yesterday reported a 7 percent growth in distributions a share to 146.35c in the year to March from 136.77c in the previous year. Net profit from property operations increased by almost 15 percent to R1.1bn from R962m.
Vacancies improved meaningfully across its portfolio, declining to 3.9 percent of gross lettable area from 4.6 percent.
Negative effects
Rapp said the results reflected an excellent operational performance that continued to improve despite an environment that kept on getting tougher.
He said they anticipated a difficult environment going forward because of the stagnant economy, political volatility in South Africa that was impacting capital markets and negative effects of the depreciation of the rand on the cost of capital for the property sector.
However, Rapp said Vukile had all the building blocks in place to manage a prolonged difficult trading environment and expect similar levels of growth for the fund in the coming year of about 7 percent.
Shares in Vukile increased 1.36 percent yesterday to close at R17.18.
BUSINESS REPORT