Vukile favours retail properties in rebalancing

THE VUKILE Property Fund has rebalanced its property portfolio in favour of retail properties.

This segment of the commercial property market now accounts for 70 percent of the listed property fund’s portfolio by value compared with 54 percent three years ago.

It has achieved this by more than doubling the value of its directly held South African real estate assets over the past three years from R6.1 billion to R15.2bn currently, with retail properties now accounting for more than R10.5bn.

Laurence Rapp, the chief executive of Vukile, said this week that they were still confident retail property would outperform other commercial property subsectors over the long term despite the South African consumer currently experiencing tough times.

“We especially see value in those shopping centres that serve lower income consumer markets,” he said. Vukile achieved the rebalancing of its portfolio through both acquisitions and by improving the quality of the retail assets it owned.

Rapp said the buildings in Vukile’s portfolio now had higher average values, carried lower risk and many included future growth potential with development, expansion and upgrade opportunities.

Vukile had an active development programme to unlock these opportunities, he said.

“Vukile continually evaluates its assets to enhance its portfolio through redevelopments, expansions and upgrades, and will continue to seek opportunities for acquisitive growth with strategic, portfolio-enhancing assets with a focus on shopping centres.

“Vukile has created a strong defensive base from which we can deliver sustainable positive performance, even in tough times,” he said.

Vukile earlier this year gained full management and financial control of Synergy Income Fund and now also holds a 34 percent stake in Fairvest. Synergy owns a specialised portfolio including 15 retail properties valued at about R2.4bn and Fairvest is retail focused.

In addition, Vukile this year acquired Nonesi Mall in Queenstown and Moruleng Mall and Batho Plaza in Soshanguve for R830 million apart from acquiring significant stakes in two regional shopping malls being devel- oped by Flanagan & Gerard Property Development and Investment. These are the 33.3 percent stake in Thavhani Mall in Thohoyandou it acquired for R350m and the 25 percent stake it purchased in Springs Mall at the Blue Crane Eco Park for R250m.

Transfer is also expected later this month of Bedford Centre in Vereeniging, which Vukile acquired for R335m.

The largest project currently being undertaken by Vukile to improve an existing asset is the refurbishment and extension of the East Rand Mall in Ekurhuleni, which the fund co-owns with listed Redefine Properties.

Vukile is investing R220m in the project, which will add 6 310 square metres of gross lettable area and increase the size of the East Rand Mall to 69 299m2. The project is expected to be complete in October next year.

A R75m upgrade is also taking place at The Workshop Shopping Centre in Durban, which Vukile had acquired in April 2012.

The 20 138m2 centre attracts more than 1 million visitors each month and Vukile’s investment is aimed at protecting the centre’s strong market position. This project, which includes an upgrade to The Workshop’s food court, is scheduled to be completed in November.

In Germiston, Vukile is investing R111m in the refurbishment and extension of Meadowdale Mall in joint venture with Moolman Group.

The project is scheduled to be completed by next month and will add 9 500m2 of gross lettable area and increase the size of the centre to 45 000m2.

On completion, Vukile will own 67 percent of the Meadowdale Mall and the Moolman Group 33 percent.

Vukile last year completed a R40m three-year phased upgrade and extension to the Hillfox Power Centre in Randburg.

Shares on the JSE closed 0.72 percent higher at R18.10.