Vuk­ile broad­ens ac­qui­si­tion hori­zon

Em­pha­sis of res­i­den­tial prop­erty mar­ket over com­mer­cial

The Star Early Edition - - COMPANIES - Roy Cokayne

VUK­ILE is to lighten its weight­ing in the com­mer­cial of­fice mar­ket and is in­ves­ti­gat­ing the pos­si­bil­ity of broad­en­ing its hori­zon into the res­i­den­tial prop­erty mar­ket, stu­dent ac­com­mo­da­tion and health care.

But Lau­rence Rapp, the chief ex­ec­u­tive of the listed prop­erty company, stressed yes­ter­day it was not stat­ing yet that it would be en­ter­ing th­ese mar­kets.

Rapp said Vuk­ile would look at light­en­ing the 22 per­cent weight­ing of com­mer­cial of­fices in its port­fo­lio by in­creas­ing the weight­ing of its re­tail port­fo­lio, look­ing at the con­ver­sion of some of its of­fices to res­i­den­tial and sell­ing some of its smaller of­fice prop­er­ties.

Rapp said Vuk­ile had an R1 bil­lion ac­qui­si­tion pipe­line of strate­gic prop­er­ties and would be pur­su­ing its of­fer to ac­quire the re­main­ing shares in Syn­ergy In­come Fund it did not al­ready own.

He said all the ac­qui­si­tion deals had been signed and were sub­ject to a due dili­gence and Com­pe­ti­tion Com­mis­sion ap­proval but would be closed out in the next three to six months.

They in­cluded a R320m in­vest­ment to ac­quire an 80 per­cent stake in the 31 653m2 Moru­leng Mall in North West; a R140m in­vest­ment in the 15 000m2 Batho Plaza in Soshanguve; a R360m in­vest­ment in the 27 700m2 Nonesi Mall in Queen­stown; and R127m in a port­fo­lio of in­dus­trial ware­house build­ings in Sil­ver­ton in Pre­to­ria.

Rapp said part of Vuk­ile’s strat­egy was to in­crease the weight­ing of re­tail in its port­fo­lio, with lower-in­come group re­tail a par­tic­u­lar fo­cus.

He said Vuk­ile re­mained stead­fast it would not over­pay for Syn­ergy shares or man­age­ment company. If Vuk­ile’s of­fer was ac­cepted, it would also close this trans­ac­tion in the next three to six months but would “wait it out” if the of­fer was not ac­cepted.

Rapp stressed Syn­ergy could not grow from where it was be­cause it could not take on more debt. Vuk­ile ac­quired an ini­tial 34 per­cent share­hold­ing in Syn­ergy a year ago and a fur­ther 6 per­cent ear­lier this month, which trig­gered a manda­tory of­fer to all the re­main­ing share­hold­ers.

Vuk­ile cur­rently has a port­fo­lio of 79 prop­er­ties val­ued at R10.58bn. Syn­ergy has a port­fo­lio val­ued at about R2.4bn, which to­gether with the Vuk­ile ac­qui­si­tion pipe­line, will in­crease the to­tal value the port­fo­lio to about R15bn if all the pro­posed trans­ac­tions pro­ceed.

Rapp said in­tro­duc­ing the Syn­ergy port­fo­lio into Vuk­ile would in­crease the re­tail as­sets in its port­fo­lio to R8.1bn or 62 per­cent of the port­fo­lio, with R9bn in lower in­come group re­tail.

Vuk­ile yes­ter­day re­ported a 7.8 per­cent growth in nor­malised distri­bu­tions a linked unit to 59.1c in the six months to Septem­ber from 54.81c in the pre­vi­ous cor­re­spond­ing pe­riod.

Like-for-like net prop­erty rev­enue grew by 7.9 per­cent. Va­can­cies de­creased to 5.4 per­cent from 5.4 per­cent. Ten­ant ar­rears rose by R5.6m to R38.2m in the re­port­ing pe­riod, with the doubt­ful debt al­lowance in­creas­ing by R5.8m to R17.1m. Rapp said the doubt­ful debt al­lowance was ex­pected to be about 1.1 per­cent of gross rental in­come for the year, which was slightly higher than the 1 per­cent pre­vi­ous im­pair­ment al­lowance.

Vuk­ile ex­pects to de­liver full year growth in distri­bu­tions of be­tween 7.5 per­cent and 8 per­cent. Vuk­ile’s shares ended the day 0.05 per­cent down yes­ter­day at R18.19.

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