Vuk­ile ac­quires Span­ish port­fo­lio for R2.8bn

Reit’s off­shore ex­po­sure has been boosted to 21%

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

VUK­ILE, the JSE-listed prop­erty com­pany, has boosted its off­shore ex­po­sure to 21 per­cent through the ac­qui­si­tion of a R2.8 bil­lion re­tail port­fo­lio in Spain.

Lau­rence Rapp, the chief ex­ec­u­tive of Vuk­ile, said yes­ter­day that the deal gave trac­tion to Vuk­ile’s stated holis­tic in­vest­ment strat­egy in the de­vel­oped mar­kets of Western Europe and set Vuk­ile apart from other South African real es­tate in­vest­ment trusts(Reits), many of which had fo­cused their in­ter­na­tional ex­pan­sion into emerg­ing eastern Euro­pean mar­kets.

The an­nounce­ment in­creases the num­ber of prop­er­ties owned by Vuk­ile in Spain to 11. It fol­lows Vuk­ile in May this year sig­nalling its in­ter­na­tional ex­pan­sion in­ten­tions when it con­firmed it was ac­tively ex­plor­ing op­por­tu­ni­ties in Spain.

Rapp con­firmed yes­ter­day Vuk­ile would “for the time be­ing” fo­cus only two mar­kets out­side South Africa, Spain and the UK.

“We would rather build a big­ger, bet­ter busi­ness in one coun­try than have eight coun­tries in our sta­ble. We think there are good op­por­tu­ni­ties to con­tinue grow­ing in Spain and we will con­tinue to look to do so.

“With this ac­qui­si­tion, Vuk­ile has se­cured a sig­nif­i­cant growth plat­form in one of the most com­pelling in­vest­ment sto­ries in the Eu­ro­zone to­day.

“We are very happy with the fun­da­men­tals of the deal and the in­vest­ment value it sig­ni­fies for Vuk­ile. It cre­ates a solid, sig­nif­i­cant base for ac­cre­tive ac­qui­si­tions in the re­gion,” he said.

Rapp con­firmed Vuk­ile had now spent the R1.5bn war chest it had avail­able for its in­ter­na­tional ex­pan­sion.

But Rapp said Vuk­ile had raised about R400m in its re­cent div­i­dend div­i­dend rein­vest­ment pro­gramme and had the ca­pac­ity to al­ways go to the mar­ket if and when it needed to.

Rapp said Vuk­ile’s gear­ing level had in­creased from 23 per­cent to 31.7 per­cent post this trans­ac­tion and its mar­ket guid­ance was that it did not want to in­crease its gear­ing above 35 per­cent on a long term sus­tain­able ba­sis.

Vuk­ile in De­cem­ber pur­chased 86.89 per­cent of the shares in Castel­lana, an un­listed Span­ish Reit for R193m that owns two call cen­tre prop­er­ties.

Vuk­ile’s UK ex­po­sure is be­ing driven through its strate­gic 29.56 per­cent share­hold­ing in At­lantic Leaf.

To fund the Span­ish ac­qui­si­tion, Castel­lana has se­cured debt fund­ing of €94.8m from Span­ish lenders at an all-in cost of debt of 1.98 per­cent, with Vuk­ile fund­ing the re­main­ing €103.3m via Castel­lana us­ing the war chest it built up for its in­ter­na­tional ex­pan­sion.

The nine Span­ish prop­er­ties ac­quired by Vuk­ile have a to­tal gross let­table area of 117 670m², are ge­o­graph­i­cally di­ver­si­fied across Spain and have a va­cancy rate of 2.7 per­cent.

Rapp added that the port­fo­lio com­prised 73 stores, of which 95 per­cent of gross rev­enue was de­rived from lead­ing Span­ish na­tional and in­ter­na­tional re­tail ten­ants, and a weighted av­er­age lease term of 15.6 years to ex­piry and 4.9 years to the next break op­tion.

Rapp said Vuk­ile was now in a dif­fer­ent league be­cause five years ago the com­pany did not have scale and its port­fo­lio was not great, com­pris­ing a di­ver­si­fied port­fo­lio of B-grade and C-grade prop­er­ties.

“We have tran­si­tioned Vuk­ile over the past five years into a fo­cused high qual­ity re­tail Reit. Peo­ple are a bit ner­vous about re­tail at the mo­ment, but it’s still the best per­form­ing asset class and it still has the most pre­dictable in­come streams,” he said.

Rapp added that Vuk­ile’s fore­cast 7 per­cent to 8 per­cent div­i­dend growth this year was con­tin­gent on do­ing this trans­ac­tion. “We have now done the deal and are very up­beat about where the busi­ness is,” he said.

Shares in Vuk­ile rose 2.35 per­cent yes­ter­day on the JSE to close at R18.73.

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