Vukile Property Fund’s Spanish armada boosts returns
SA fund spent nearly €600m on Spanish assets in reporting period
Vukile Property Fund grew its dividend per share 7.5% in the six months to September, making it its 15th consecutive year of growth, as the company’s investment in Spanish group Castellana Properties boosted its overall profit.
The company declared a dividend of 78.10c a share in line with guidance, results released on Thursday showed, while its Spanish exposure increased from €308m to €900m following the acquisition of five shopping centres during the period.
It is the only JSE-listed South African fund with exposure to Spanish real estate.
CEO Laurence Rapp said Vukile had invested aggressively in Europe’s fifth largest economy. At the end of September, 50% of the fund’s total assets were in Southern Africa and 50% were offshore. As much as 46% of the offshore assets were in Spain while 4% were in the UK, through Atlantic Leaf Properties.
“We are delighted with our half-year progress and pleased to report another set of positive results that deliver on our promises and our strategic objectives. Strong asset management is driving both our southern African retail portfolio and Spanish investment strategy. Vukile is comfortably on track to deliver dividend growth for the full 2019 financial year in line with the half-year. We are well positioned for long-term growth and sustainability,” he said.
Vukile’s 98% stake in Castellana is worth R14.8bn, while its stake in Atlantic Leaf is worth R1.3bn.
The company's Southern African assets are worth R16.2bn and includes a R0.62bn investment in Fairvest Property Holdings and a R0.78bn stake in Gemgrow Properties. The directly held South African portfolio is worth R14.5bn with 91% of it including retail assets. These retail assets achieved 5.1% like-for-like growth in net property income and positive rental reversions of 4.3%. Retail vacancies were stable at 3.4%, lower than the market average of about 4.2%. Retail trading densities grew 1% overall, exceeding the SA Property Owners’ Association September average of 0.2%.
Rapp said Vukile’s rural and township shopping centres stood out with 3.1% and 2.1% trading-density growth respectively, compared with urban centres which suffered an overall shrinkage in trading density of 0.8%.
Vukile had made progress on its R200m upgrade of Pinecrest Shopping Centre in Pinetown, KwaZulu-Natal, which will boost gross lettable area by more than 10% from 40,100m² to 45,200m². The centre will be relaunched and rebranded in May 2019.
The company was also redeveloping Maluti Crescent in Phuthaditjhaba, at a cost of R392m, adding as much as 57% to the centre’s gross lettable area to meet growing demand. This project was at a yield of 8.1% and is expected to be completed in April 2019.
Evan Robins, a fund manager at Old Mutual Investment Group, said Vukile’s results were strong across numerous levels.
“This is a very solid set of results across a number of metrics. The dividend outlook was at the bottom end of guidance of the range previously provided, but that’s good considering the current environment,” he said.
Vukile had forecast dividend growth of 7.5% to 8.5% for the financial year to March 2019.
Vukile has now changed this guidance and expects to grow its total dividend about 7.5% for the full financial year to March 30.