Vukile footfall up in township malls
• CEO Rapp says trade is strong despite the gloomy macroeconomic data
Footfall in the SA portfolio of Vukile Property Fund, which owns malls in SA and Spain, has returned close to prepandemic levels in its rural and township properties as shoppers seem undeterred by high inflation, interest rate hikes and a possible global recession.
Footfall in the SA portfolio of Vukile Property Fund, which owns malls in SA and Spain, has returned close to pre-pandemic levels in its rural and township properties as shoppers seem undeterred by high inflation, interest-rate hikes and a possible global recession.
The specialist retail real estate investment trust (Reit) reported on Tuesday in its halfyear results to end-September that the number of people visiting its local properties was 97% overall compared to the same period in 2019.
However, more people are going to the shops in its rural and township properties than before the Covid-19 pandemic, with 109% and 101% in reported footfall, respectively.
CEO Laurence Rapp called it an anomaly, as most macroeconomic data is painting a grim picture, yet trading in these properties remains strong.
“I think the issue is the cash economy that often doesn’t get reported in numbers and is very vibrant and the markets we are operating in,” he said during a media briefing, noting the effect of money transfers and cash that customers earn in urban areas but spend elsewhere.
To boost this, the company has tried to change its tenant mix from stores where customers would spend their disposable income, such as department and jewellery stores or restaurants, and replace it with retailers where they buy essentials, such as groceries, value fashion, and health and beauty items.
This was visible in six of Vukile’s top 10 retailers — which include TFG, Mr Price and Pepkor — opening 40 new stores in its portfolio.
This is a welcome improvement after some stores at Vukile’s properties were looted and damaged during the social unrest in Gauteng and KwaZuluNatal in July 2021.
“There has been a sense of ‘a great restart’ characterised by aggressive retailer expansion, increased spend, improved mall footfall and more effective stakeholder engagements across the value chain,” the company said in its results. The rebound in commuters also boosted malls in city centres, which are popular among travellers.
The company, valued at R14.13bn on the JSE, generates 57.1% of its property revenue in SA in its local portfolio, which includes 41 properties with a gross lettable area (GLA) of 811,536m², about the size of 114 football pitches
Some properties in this portfolio, valued at R14.6bn, include the Dobsonville Mall in Soweto, East Rand Mall in Boksburg, the Kolonnade Retail Park in Pretoria and the Phoenix Plaza in KwaZulu-Natal. The greater demand has led to lower vacancies, with vacancies decreasing 30 percentage points to 2.3%, and a growth in net property income of 4.2% to R600.5m.
But it’s not all good news as problems such as load-shedding persist. Vukile noted its concerns about ineffective law enforcement and municipal services disrupting the trading of businesses, and worries about water scarcity, in particular.
To help offset these problems and move to greener solutions in SA and Spain, there is 800kW of installed solar photovoltaics (PV) in SA, while another 1.7MW is currently being installed and 2.5MW are planned for Spain.
The total installed PV plant capacity is now 12.7MW and 9% of the electricity used in the portfolio comes from PV projects. Similar projects are currently under way at the East Rand Mall, Kolonnade Retail Park and Maluti Crescent in Phuthaditjhaba, Free State. In terms of financials, Vukile upped its interim dividend 16.8% year on year to 47.32c per share, while funds from operations rose 3.7% to R791m.
The group’s net asset value (NAV) per share rose 6.6% to R19.10 thanks to a positive performance in net property income and favourable exposure to a weaker rand.
Vukile kept its guidance for its full 2023 financial year unchanged at a 5%-7% growth in dividends.