Vukile Property Fund achieved 7.5% growth in dividends to 181.48c a share for the financial year ended March 31, boasting a strong, above-market performance in a “tough” year.
At a briefing on its results, on Monday, CEO Laurence Rapp said the year had been characterised by difficult macroeconomic conditions and political uncertainty, which had hampered the property sector.
He, therefore, lauded the company for its performance, with the growth attributed to the fund’s growing international diversification and value-adding asset management in Spain. He further said the company’s results were underpinned by a solid operational performance from its Southern African portfolio, its robust balance sheet and capital market support.
Rapp stated that the fund was in the best possible shape, both operationally and strategically.
Vukile’s full-year returns met market guidance and contributed to its 15 years of uninterrupted dividend growth for Vukile investors.
Rapp enthused that this has been the fund’s best results to date.
Moreover, it was the fund’s most transformative year, with Vukile now a high-quality low-risk retail real estate investment trust (Reit) with just under half of its R28.7-billion direct property investments in Spain.
During the financial year, Vukile recorded strong growth in its Spanish asset base, which tripled in value.
Vukile’s listed Spanish subsidiary, Castellana Properties, is the ninth biggest Reit in Spain by market capitalisation.
Castellana delivered a strong operational performance and high-impact asset management interventions that are paying off well.
All nine of its original retail parks are now fully let, and Castellana is achieving positive reversions on expiring and new rentals of nearly 11%, with like-for-like rental growth of 3.5% compared with a 1.2% inflation rate in Spain.
Castellana’s loan-to-value ratio decreased to 46% and Vukile will continue to reduce this.
Meanwhile, Vukile’s South African business delivered a sound performance in an extremely difficult economy.
It achieved positive retail rental reversions at 4.5% and reduced vacancies to 3% with 87% tenant retention.
In South Africa, Vukile continued to grow its portfolio size and improve its quality by buying Kolonnade Retail Park, in Pretoria, for R470.6-million and investing in core assets with upgrades, redevelopments and expansions.
Vukile’s R392-million redevelopment of Maluti Crescent opened on March 21 to become the dominant centre in Phuthaditjhaba, in the Free State
Moreover, its R200-million major renovation of the Pine Crest Shopping Centre, in Pinetown, is set to open in July.
Rapp emphasised that Vukile was focused on its long-term sustainability and would execute its strategy in line with this.
Vukile had several transactions in progress at year-end that were aimed at recycling capital from its noncore assets into its retail assets. This included the sale of its remaining nonretail assets in South Africa to an empowerment group and the disposal of its Namibian portfolio.
Rapp indicated that following the completion of the Namibian disposal, the capital would be deployed to either its South African or Spanish retail operations.
Further, after year-end, Vukile reached a still highly conditional agreement to acquire three assets from Rebosis Property Fund. Rapp emphasised that these three particular assets were aligned with Vukile’s strategy of retail property investment in high-density markets.
While Vukile is in negotiations regarding several transactions, it expects to grow its dividends for the 2020 financial year by between 3% and 5%, assuming no major economic or market shocks occur.