Rapp’s reign in Spain makes prof­its grow

Financial Mail - Investors Monthly - - Analysis -

The SA listed prop­erty sec­tor had a dis­mal start to 2018 with a -18% to­tal re­turn year to date (to June 13).

But not ev­ery prop­erty punter has lost money. In­vestors who bet­ted on re­tail­fo­cused Vuk­ile Prop­erty Fund are in the pound seats. The share price is up 12% from its Fe­bru­ary lows of R19.65, and the com­pany con­tin­ues to de­liver in­come growth.

Last month, Vuk­ile de­clared div­i­dend growth of 7.7% for the year end­ing March, com­fort­ably ahead of the 6% div­i­dend growth ex­pected for the listed prop­erty sec­tor this year.

More im­pres­sive is that man­age­ment, un­der CEO Lau­rence Rapp, ex­pects to main­tain the mo­men­tum with div­i­dend growth of 7.5%-8.5% fore­cast for the 2019 fi­nan­cial year. That’s not easy in this

eco­nomic cli­mate, where there’s been a marked de­te­ri­o­ra­tion in va­can­cies, rental growth, lease re­newal rates and trad­ing den­si­ties.

Vuk­ile’s lo­cal R13.2bn port­fo­lio of 46 shop­ping cen­tres has per­formed strongly for the 12 months end­ing March. At a time when most other SA mall own­ers are re­port­ing a rise in va­can­cies, Vuk­ile re­duced its re­tail va­can­cies from 3.6% to 3.4%. Trad­ing den­si­ties are also hold­ing up well.

Vuk­ile’s small re­gional and com­mu­nity cen­tres de­liv­ered 3.6% growth, while its ru­ral re­tail port­fo­lio notched up 7%, well ahead of the -2.3% av­er­age growth re­ported by the IPD trad­ing den­sity in­dex for the SA re­tail mar­ket in the fourth quar­ter last year (year-on-year).

Speak­ing at the com­pany’s re­sults pre­sen­ta­tion last month, Rapp said th­ese num­bers un­der­score the de­fen­sive na­ture of Vuk­ile’s re­tail port­fo­lio. “It also vin­di­cates our de­ci­sion to re­duce our of­fice and in­dus­trial ex­po­sure and fo­cus more on re­tail. There’s no doubt re­tail is still the place to be in SA,” Rapp said.

Per­haps more in­trigu­ing is Vuk­ile’s re­cent en­try into the Span­ish re­tail prop­erty mar­ket — the only listed SA real es­tate player to do so to date. While most of his peers have ven­tured into Cen­tral and East­ern Europe, Rapp chose Spain.

“We didn’t want to ex­pand into another emerg­ing econ­omy. We were look­ing for a de­vel­oped coun­try with strong eco­nomic growth prospects and an ac­tive and deep re­sale mar­ket. Spain ticked all the boxes,” said Rapp.

Vuk­ile en­tered Spain in July last year, ac­quir­ing 11 re­tail parks. It added two more prop­er­ties through lo­cal sub­sidiary Castel­lana Prop­er­ties and last month bought its big­gest as­set to date, the 24,158m2 Ha­baneras Shop­ping Cen­tre in Tor­re­vieja. The à80m ac­qui­si­tion has brought the value of Vuk­ile’s Span­ish ex­po­sure to nearly à400m. Rapp said though there is a “wall of money” chas­ing prop­erty deals in Spain, es­pe­cially from Asia, Vuk­ile’s com­pet­i­tive ad­van­tage is that it has es­tab­lished a strong lo­cal in­vest­ment team.

Rapp said though Vuk­ile

Joan Muller

en­tered Spain less than a year ago, it has made swift progress.

Vuk­ile of­fers a com­pelling in­vest­ment case for in­come chasers look­ing for con­sis­tent and pre­dictable growth. This year it ex­tended its 14-year record of un­bro­ken div­i­dend growth with an av­er­age to­tal re­turn of 22%/year since list­ing in 2004.

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