JSE-listed Vukile Property Fund’s distributions for the six months ended September 30, increased by 7%, in line with guidance.
 
Vukile boosted its distributable income by 27.7% year-on-year to R426.3-million and grew like-for-like net property revenue by 6.1%.
 
CEO Laurence Rapp noted that the company also delivered key strategic achievements, growing its portfolio of high-trading shopping centres, enhancing the quality of its properties and launching its international investment strategy. Retail property now comprises around 70% of Vukile’s overall portfolio value.
 
“We are pleased to deliver another positive set of results that are on target and show superb operating metrics, while also achieving inflation-beating distributions for Vukile shareholders.

“While the macroeconomic environment remains very challenging, Vukile has robust strategies in place and is on track to deliver full-year results in line with this performance,” he commented.
  
During the half-year under review, Vukile contained its vacancies at 4.7% of gross lettable area with its retail vacancies unchanged at 3.4%. It achieved positive rental reversion across all sectors at an average 9.6%, with retail reversions up 13.6%. It also signed its new retail deals at 12% above budgeted levels.
 
“This shows the underlying strength of our retail portfolio and that our retail assets are not overrented. While our shopping centres may not all be high profile, their trading strength makes them attractive to retailers. Our high-quality retail portfolio is 83% tenanted by national brands and our centres have trading densities above sector averages,” Rapp pointed out.
  
Growing its retail portfolio during the period, Vukile acquired three retail shopping centres – Moruleng Mall, Batho Plaza and Nonesi Mall – for R846-million at a combined yield of 8.6%.

It also concluded a R600-million deal to acquire stakes in two regional mall developments, 25% of Springs Mall at Blue Crane Eco Park and 33% of Thavhani Mall, from leading retail property developers Flanagan & Gerard Property Development & Investment.
 
“We are excited about the scale and market offering of both these malls, which will open to shoppers in 2017. They will add further quality to our retail portfolio,” Rapp said.
 
Vukile prefunded both developments resulting in zero equity market risk. It also raised R1.1-billion in equity in May, while refinancing debt of R1.4-billion and domestic medium-term note bonds during the period. Its AA-bond rating had also been reaffirmed by Global Credit Ratings, which meant that the fund remained conservatively geared at 27.8%, with 84% of debt hedged.
 
Meanwhile, the real estate investment trust also committed R602-million to the upgrade and redevelopment of its assets. This included the recently expanded and upgraded Meadowdale Mall, in which Vukile held a 67% stake in partnership with Moolman Group. It was now fully let with extended leases from key tenants and showing strong initial trading with an expected first-year yield of 10%.

The expansion of East Rand Mall, which Vukile co-owned equally with Redefine Properties, was continuing. It was attracting strong tenant demand from local and international retailers, reinforcing its dominant position on the East Rand. Vukile was also modernising The Workshop Shopping Centre in the Durban central business district, which was creating new tenant demand.
 
Entering new markets, the fund also made a R350-million investment to acquire a 21% interest in AltX-listed Atlantic Leaf Properties, which held a R3.1-billion real estate portfolio in the UK.
 
“This was the ideal entry point to international markets for Vukile. Atlantic Leaf has a great management team and a strong underlying low-risk good-quality portfolio. European markets represent similar inflation-adjusted real returns to our local market but, for South African investors, they also deliver the benefit of a currency hedge,” Rapp highlighted.
  
Despite the majority of its portfolio focusing on retail, Vukile had now set its sights on entering the residential market and was making good progress, expecting to launch its residential property strategy before the end of the financial year.