Vukile Property Fund to say ‘adiós Namibia’ and ‘hola Spain’
Its Spanish exposure is worth R17bn and accounts for 48% of its total assets
JSE-listed real estate investment trust (Reit) Vukile Property Fund will sell its Namibian assets valued at nearly R1bn by the end of 2020, saying it will focus mainly on SA and Spain.
The company’s management said in a presentation to shareholders on Wednesday that it would sell noncore assets in 2020 and introduce Spanish group Castellana Properties as a shareholder. It would decrease its relative debt levels by exiting Namibia, a noncore market.
Vukile first invested in Spain in 2017, so that the fund would be protected against a weak and volatile SA economy. The group has since acquired interests in two Spanish portfolios through its partner Castellana Properties, which had performed better than expected, it said.
Its Spanish exposure was worth R17bn and accounted for 48% of its total assets. Its directly held SA properties are worth about R15bn, while its Namibian assets are worth about R950m. It also owns stakes in SA property groups Fairvest and Arrowhead Properties, worth R552m and R515m, respectively.
The company wants to lower its loan-to-value (LTV) from 40.8% to a range of between 35% and 40%, a range with which a group of fund managers have said they would be comfortable in SA’s weak economic environment. To do this, it will exit Namibia, selling its assets there to decrease its LTV by 1.7%. The sale of noncore office and industrial assets will drop the LTV by a further 1.1% and the sale of noncore retail assets by a further 1.5%.
Castellana would also acquire equity worth €100m (R1.6bn), which would reduce its LTV by 1.8%. This would leave Vukile with an LTV of 34.7%.
Vukile would hold on to its other SA malls, which served working-class and middle-class customers. It said these assets had a defensive tenant mix, with about 80% national tenants and a large grocery component.
Vukile still owns a 34.9% stake in UK industrial property owner Atlantic Leaf properties, worth about R1bn, which is not held for sale. The company said it is satisfied with the operations and strategic direction of Atlantic Leaf. It would consider an exit at the right price to redeploy funds into Spain, CEO Laurence Rapp said.
The group would invest further in SA if highly attractive, one-off opportunities became available but Spain stands out as a target for its capital.
“Spanish retail and economic fundamentals remain positive. This is not an over-retailed market and it has 560 retail assets,” the group said. “Spanish consumer and social culture, together with a large tourist market, provide a defensive position against online retail sales,” the group said.
Keillen Ndlovu, head of listed property funds at asset manager Stanlib, said Vukile’s Spanish assets would cushion it against weaknesses in its domestic portfolio.