Roy Cokayne

Vukile sees itself as an acquirer of other listed property funds.

Laurence Rapp, the chief executive of the listed property fund, said yesterday that evidence of this was the fund’s acquisitions of a 33.2 percent shareholding in Fairvest and a 34 percent stake in Synergy Income Fund.

Vukile sold four properties to Fairvest in exchange for a 31.5 percent shareholding in the fund effective from January, and increased its stake to 33.2 percent through the subsequent acquisition of a further 2.1 million Fairvest units in the market.

Vukile acquired a 34 percent stake in listed Synergy Income Fund from Liberty Group in December last year.

Rapp said Vukile’s investment in Fairvest allowed it to gain exposure to smaller retail properties, which was consistent with its strategy of owning lower living standards measure (LSM) retail assets on an indirect basis for retail centres smaller than 10 000m2.

Synergy had 15 assets worth about R2.2 billion that were all focused on the lower LSM shopping market, a segment where Vukile had a track record and was strong, and admitted Synergy would be a tremendous addition to the Vukile portfolio if it were able to conclude a transaction.

Rapp said Vukile was in talks with Synergy about further opportunities but was concerned about the pricing of Synergy units in the market.

He believed Synergy’s share pricing involved “an irrational exuberance” with regard to corporate activity while the share also did not rerate in January when the market rerated following the interest rate hike.

“It’s a highly illiquid share so we do have a concern that their shares are not reflecting reality in terms of some of those market conditions. But if we are able to find a way to a deal [that is] accretive and value enhancing for Vukile, we will certainly look to do it,” he said.

Vukile yesterday reported a 5 percent growth in distribution to R1.26 a unit in the year to March.

The size of the property portfolio grew in the year by 33.6 percent to R10.3bn, largely after the acquisition of a 50 percent stake in East Rand Mall, the Encha portfolio, Letlhabile Mall, Hammarsdale Junction, 30 percent of Ga-Kgapane Modjadji Plaza and undeveloped land in Midrand.

Like-for-like net property revenue rose 6.8 percent. The firm achieved positive rental reversions on renewals in all sectors, especially retail where reversions added 7.8 percent. New leases and renewals of 285 098m2 with a contract value of R1.06bn were concluded in the year and 91 percent of leases were successfully renewed.

Vacancies declined to 6.7 percent from 7.1 percent.

Rapp said Vukile, listed in June 2004, had an unbroken 10-year track record of growth in distributions. It had grown the value of its portfolio from R3.1bn to R10bn, its market capitalisation from R1.3bn to R8.5bn and achieved a total annualised return of 23.6 percent over this 10-year period.

Distribution growth for the listed property sector was forecast at between 7 percent and 8 percent for the next year despite the dual headwinds of a stubbornly sluggish economy and rising interest rates.

Rapp was confident Vukile would deliver growth in distributions at least in line with the top end of this projected sector growth.

Vukile units fell 0.65 percent yesterday to close at R16.89 on the JSE.