Vukile increases full-year guidance on the back of strong interim performance

An image of Vukile Property Fund CEO Laurence Rapp

CEO Laurence Rapp

29th November 2023

By: Tasneem Bulbulia

Senior Contributing Editor Online


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JSE-listed Vukile Property Fund achieved a 10% increase in its cash dividend to 52.1c a share and a 5.2% growth in its funds from operations (FFO) to 85c apiece for the six months ended September 30.

The company has increased its full-year 2024 growth guidance for FFO a share to between 4% and 6% and dividend a share to between 8% and 10%, and CEO Laurence Rapp says the company is confident it will deliver on this, despite headwinds in the market.

“Vukile has sustained strong operational results and positive trading metrics in both our South African and Spanish portfolios and our balance sheet strength is supported by robust credit metrics,” he avers.

Vukile has a R39-billion defensive portfolio of retail property assets across South Africa and Spain, with the latter owned through its 99.5% held Madrid-listed subsidiary Castellana Properties Socimi. About 60% of its assets are in Spain.

Almost 50% of its earnings are in euros and Vukile’s results were further enhanced by the rand hedge nature of its earnings.

“Vukile's strategy of owning dominant assets in their catchment areas and operational focus on the consumer as the source of value creation has become our differentiator in driving performance,” Rapp says.

He highlights the performance of the company’s Spanish portfolio, as well as good results from South African assets.

Vukile’s defensive domestic portfolio of high-quality shopping centres located mainly in townships and rural areas achieved like-for-like net operating income growth of 5.1%, and property valuations increased by 3.9%, Rapp points out.

Vacancies remained at a low 2%, and excluding office space within retail properties, this figure decreased to 1.3%.

Rental reversions rebounded from -2.4% to 2.4%, and 86% of leases reverted flat or positively, the highest proportion since 2018.

There was a 3.9% increase in tenant trading densities. Township centres outperformed, and the retail assets in Cape Town and Ekurhuleni performed best.

In the Spanish portfolio, which is 95% let to top-tier international and national retail tenants, normalised net operating income grew by 13%.

High tenant demand and a very good asset performance yielded vacancies of 1%.

Rental reversions gained a positive 8.3% and, including inflation adjustments, rose by 11.6%.

Castellana’s 25.7% investment in Lar Espana is said to be performing well with a 12% dividend yield.

The company says good Spanish economic fundamentals underpin the portfolio’s positive and improving metrics.

Vukile has a strong balance sheet and its corporate long-term credit rating of AA(ZA) by ratings agency GCR was reaffirmed during the year, with a stable outlook.

It has no refinancing risk in Europe until full-year 2026 and all its full-year 2024 debt maturities have already been repaid, refinanced or renegotiated with Vukile’s High-Quality Liquid Asset status enabling it to access debt at lower margins, albeit that base rates are up.

Its interest cover ratio is noted as a comfortable 2.9 times.

Vukile has strong liquidity with cash and undrawn debt facilities of R3.1-billion.

“Despite constrained capital markets and real estate being out of favour globally, there is exciting potential for brilliant deals to be done at attractive pricing in this market. Those ready to move at the first signs of the global cycle turning have the potential to close exceptional deals,” says Rapp, adding that the company is readying itself to capitalise on this. 

In terms of environmental, social and governance, in South Africa, Vukile installed a further 3.7 MW of renewable solar energy generation, bringing its total capacity to 18.6 MW.

It intends to increase this to 25 MW by full-year 2025, with projects for a further 7.1 MW already under way.

In addition, 43% of the Vukile Academy Class of 2023 have already been placed in formal employment since their graduation, with Rapp saying the company is exploring options for the remainder, while the Vukile Retail Academy gave eight emerging retailers assistance into the formal retail arena. 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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