JSE-listed Vukile Property Fund’s headline earnings a share for the year ended March 31, increased by 14% year-on-year to 187c, while earnings a share rose 21% to 278c.

The fund further reported 8.1% year-on-year growth in normalised distributions a share, delivering results just ahead of its initial market guidance of between 7% and 8%.

There was positive momentum in the latter part of the year, with distributions growing by 8.4% in the second half of the year.

This was Vukile’s eleventh consecutive year of growth in distributions.

Vukile CEO Laurence Rapp said the results reflected a strong year for the company, with it having delivered on its forecasts, achieved robust operational performance across all key metrics, exceeded its portfolio growth targets and delivered on its strategy.

Speaking to the media at the company’s offices, in Johannesburg, he added that the 11-year growth record was “very encouraging. We are upbeat about the year that we have had, we have delivered on the numbers. . . notwithstanding our very conservative hedging stance that supports the long-term nature of our investment philosophy”.

During the year, Vukile extended its hedges out by a further 12 months at a cost of R4.2-million.

“Had we not done this, distribution growth would have been higher at 8.7%. Following our strategy of growing Vukile to at least R10-billion in assets, going overweight in the retail sector and constantly improving the quality of the portfolio, Vukile is now a high-quality, low-risk fund with a strong balance sheet and well positioned to manage through the property cycles. We are in a good position to take advantage of opportunities in the market,” Rapp highlighted.

During the year, the company raised its gross property revenue by 13.6%, its distributable income by 11.6% and increased its net asset value a share by 14.6%.

The real estate investment trust held property assets valued at R13.3-billion, with retail centres accounting for 64% of its portfolio, in line with its stated strategy of being substantially weighted in favour of retail property as it grows. With its 33.9% holding in Fairvest, its total assets are R13.6-billion.

The retail portfolio’s exposure to national, listed and franchised tenants was 81% in total.

Meanwhile, Rapp highlighted that the company’s assets would grow by a further R1-billion once acquisitions secured and awaiting transfer as at year-end were finalised. These included the 27 700m² Nonesi Mall, in Queenstown; Moruleng Mall, in North West; Batho Plaza, in Soshanguve, Gauteng; a portfolio of distribution warehouses in Silverton, in Gauteng; and a further 40% interest in Maake Plaza, in Limpopo.
 
In line with its strategy to add value to its existing portfolio through upgrades and redevelopments, Vukile is investing R406-million on certain of its property assets, including ongoing projects at East Rand Mall, in Boksburg, which it co-owned with Redefine Properties; Meadowdale Mall, in Germiston; a R55-million upgrade at The Workshop, in Durban; Sanlynn Office Park and Suncardia, in Pretoria; and extending the De Tyger Office Park, in Parow, to develop premises for The Cure Day Clinic.

The 1 130 m² clinic was being built on available land originally earmarked for a fifth office block. A ten-year lease has been concluded with the group, while capital expenditure for the project was estimated to be R24.7-million

OUTLOOK & GROWTH PROSPECTS
Vukile’s positive performance was set to continue. “We know the markets are tough and the electricity crisis is dampening business [optimism] and impacting our tenants, yet Vukile is in a healthy position with a strong balance sheet and a solid, growing portfolio. We are confident that Vukile will deliver growth in distributions of between 7% and 8% a share for its investors in the coming financial year,” Rapp said.

The company remained conservatively geared at a defensive 26% with 88% of its debt fixed, and enjoyed good access to diverse funding sources.

“While we are circumspect about the economy, we are also actively seeking new opportunities for strategic growth. Besides our core portfolio, we also plan to develop an incubator portfolio by actively seeking opportunities in other asset classes to grow Vukile even further. Even with our expanded vision, all acquisitions will be accretive and add value to the strategy and earnings of the portfolio.

“Vukile has clearly telegraphed our strategies to the market, delivered on our promises and reported our progress. We will continue to do this and remain focused on building a superior low-risk portfolio with a high-quality earnings stream that is capable of generating sustainable long-term returns for our shareholders,” Rapp noted.

He added that the company was looking at offshore property developments to further diversify its portfolio. “We cannot discuss this yet, but we are looking at more developed markets. We are actively looking at expanding in overseas markets through joint ventures with specialists in these countries,” he said.

SYNERGY
Also leveraging off its deal-making acumen, Vukile finalised its acquisition of 65% of Synergy Income Fund during the financial year under review.

While Synergy’s performance had disappointed in the 2015 financial year, Rapp said this was in line with Vukile’s expectations and was mostly because of the one-off costs incurred by Synergy in defending the Vukile takeover transaction, as well as the impact of Ellerines store closures following the retailer’s demise.

On the positive side, 67% of the Ellerines space had already been re-let.

“We intend to breathe new life into Synergy by giving it its own strategy and positioning it as a high-growth vehicle. We are considering a range of strategic options and will communicate plans in due course,” Rapp added.