Vukile aims to reign in Spain
AMBITIOUS: LOOKS TO BECOME A DOMINANT PLAYER
Company reported 3.5% growth in dividends to 80.84 cents per share.
Vukile Property Fund plans to conquer the Spanish retail real estate sector. This follows it securing a €1 billion (R16.15 billion) foothold in the country through its Madrid-based listed subsidiary Castellana Properties Socimi SA.
Speaking during Vukile’s halfyear results to September 30, CEO Laurence Rapp said the real estate investment trust (Reit) wants to dominate the Spanish retail property scene, with the aim of being “one of the top three largest retail Reits” in the next few years.
“We are doing tremendously well in Spain and what we targeted at the onset is coming to fruition. Our subsidiary, Castellana is now the eighth largest property company by market capitalisation in Spain and the seventh largest retail-focused Reit by gross lettable area,” he says.
“We are poised for further growth in the market and want to have a dominant position.”
“We made two further acquisitions in Spain during the period, which took the value of our assets there to more than €1 billion.
“These acquisitions were below their valuations. We are buying ‘undermanaged’ assets, but through active asset management, are extracting value.
“Our growth in Spain is not coming from yield compression, but through NOI [net operating income] growth.”
The 30 000m2 Puerta Europa shopping centre in Algeciras, Cádiz, is Vukile’s latest acquisition through Castellana in Spain. Puerta Europa is a double-level mall that has 97 stores, with a dedicated food and leisure area, including a 10-screen cinema complex.
Rapp says Castellana delivered strong operational performance with reduced vacancies to 1.4%, positive rental reversions up 6.7%, and 21% rental growth on new leases. Portfolio retail sales increased by 3.1%, double the 1.4% national benchmark.
Vukile’s investment drive into Spain was launched three years ago, and its Spanish assets now contribute 47% of its earnings.
Rapp says despite the tough market in SA, the local portfolio, which is largely made up of township and rural shopping centres, also performed well.
“The defensive nature of our grocery-anchored centres, which mostly sell everyday goods and have a mix of retailers who offer necessities and value-driven items, is serving us well,” he says.
Vukile managed to reduce vacancies within its SA portfolio to 2.8%, retain 82% of retail tenants and gain strong like-for-like net property income growth of 6.1%.
For its half-year to September, Vukile reported 3.5% growth in dividends to 80.84 cents per share. This came in at the lower end of its market guidance of 3% to 5% growth in dividend per share (DPS).
Highlighting how dividend growth has slowed in the SA listed property sector, Vukile’s distribution growth for the halfyear to September 2018 came in at 7.5%. Vukile is anticipating full-year DPS growth of between 3% and 5% for 2020.
Vukile’s loan-to-value ratio (LTV) now stands at 41%. However, the group recently announced the sale of its last non-retail assets in SA to empowerment group Mbako Property Fund for R700 million. Rapp says the group would like its LTV to be between 35% and 40% and that the money from the recent sale will go towards bringing down its debt.
What we targeted at the onset is coming to fruition