Vukile Property Fund plans to divest from the UK
JSE-listed diversified property group Vukile will sell its controlling stake in Atlantic Leaf Properties in a move that will result in the company exiting the UK market.
The company said on Friday it is in talks with potential investors for its 34.9% stake, valued at R1.25bn, in Atlantic Leaf.
CEO Laurence Rapp has said the company wants to focus on its investments in SA and Spain.
Vukile first invested in the Iberian country in 2017 when it bought a portfolio of retail assets in coastal towns that attract tourists. Vukile wanted to protect its funds against a weak SA economy. In 2019 Spain ranked second as the most visited country in the world behind France.
The group has since acquired interests in another Spanish portfolio through its partner Castellana Properties. Its Spanish exposure is worth R17bn and accounts for 48% of its total assets. Its directly held SA properties are worth about 15bn.
Atlantic Leaf is a Jersey-incorporated UK real estate investment trust (Reit), with a primary listing on the main board of the JSE and a secondary one on the Mauritius stock exchange. The company focuses predominantly on investments in the industrial sector of the UK market.
It owns distribution warehouses, many of which are used for “last mile” logistics. Goods are moved from British cities such as London and Birmingham to Atlantic Leaf’s properties where they are held before being transported to customers living in smaller towns.
Nesi Chetty, a senior listed property fund manager at Stanlib, said Vukile had flagged that it wanted to sell its UK investment for a while.
“For some time they have mentioned that they will look at all value-unlock opportunities in the business. The proposed exit of Atlantic Leaf through this transaction allows them to dispose some of their noncore assets for cash at a time where some companies are struggling to dispose of noncore assets,” he said.
In the UK and Eastern Europe, some deals fell away due to Covid-19 disruptions. “Vukile have done well to get this transaction away,” said Chetty.
He said the proceeds from the proposed transaction would strengthen Vukile’s balance sheet and allow it to reduce its debt through this period.
“The strategy of the business continues to be through their SA and Spanish property assets. The cash they will receive from the acquirer of Atlantic leaf will be around £51m [R1bn], which in this market will be greatly received,” he said.
Vukile would make a profit of about R41m on the sale of its stake.
This was calculated with reference to the six-month carrying value to the end of September 2019.
On Friday, Vukile’s share price moved marginally down to close at R5.25. Atlantic Leaf closed unchanged at R13.