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Publication

FINANCIAL MAIL PROPERTYHANDBOOK

Page

88-89

Date

Thurs 26 July2018

AVE(ZAR)

58925.5

VUKILE PROPERTY FUND

CEO LaurenceRapp

ukile Property Fund'sturnaround strategy,which began several

years ago, is bearing fruit as thefund has repositioned itself as afocused retail player, with investments in SA, the UK and.,more recently, Spain.

The fund, which first listedon the JSE in 2004, became thefirst property companyto beawarded real estate investmenttrust(Reit)statusback in 2013and has a 14-year track recordof unbroken growth in distributions.

Led by CEO Laurence Rapp.Vukile has a portfolio worthR21.6bn, which includes equityinvestments in property companies Fairvest Property Holdings (R595m),Gemgrow Properties (R790m), Atlantic LeafProperties (RL2bn), and Castellana Properties (R4.5bn)

The latter is an unlistedSpanish Reit, which Vukile ishoping to list on the MadridStock Exchange by August 2018.

Vukile's SA portfolio hastransformed in recent yearsfrom one that was predominantly office- focused withsovereign assets acquired in theunbundling of the Sanlam portfolio, to a retail dominated Reit

Thedirect portfolio consistsof 46 properties valued atR13.2bn (excluding Vukile's 80%interest in Moruleng Mall inRustenburg), spanning810,398 m* of gross lettablearea (GLA).

The average value per prop-

erty was R288m as at March2018, up from R196m at March2017,which reflects the successof management' s turnaroundstrategy and the concer ted fo-cus on improving the portfolioquality through active assetmanagement and the disposal ofnoncore properties.

A significant part of thisturnaround was the asset-swapagreement with Synergy In-come Fund (now named Gem-grow) in 2016,which resulted inVukile swapping a portfolio ofolder office and industrial buildings for a retail portfolio of similar value.

Vukile holds a passive stakein Gemgrow, which it will lookto recycle as currency when thetiming and market pricing conditions are favourable.

Vukile's largest property asset is a 50%stake in Boksburg'sEast Rand Mall, which itco-owns in an undivided sharewith Redefine Properties.

The revamp and extension ofthe mall has positionedit wellfor growth, with an average an-nual footfall of 10.5mand a current vacancyof 0.5%.

Of the company's SA port-folio, 41%is Gauteng-based, in-cluding the East Rand Mall,Soweto's Dobsonville Mall, Daveyton Shopping Centre, Mead-owdale Mall and the RandburgSquare.

The company entered theSpanish market in July 2017, fol-lowing an economic recovery inthe country.

Spain's economyis nowthe4th largest in Europe, with GDPgrowth forecast to be one of thehighest in the EU at 2.7%in2018.

The first tranche of acqui-sitions in 2017was a portfolio of11retail parks valued at €193m,with further acquisitions overthe period and after year-end,taking the portfolio to about€400m (R5.8bn) in value and197,132m*of GLA by June2018.

Through its offshore expan-sion initiatives, Vukile has man-aged to reduce the group's

defensive, with a loan-to-valueratio of 28.2%as at March 2018.andsee-throughgearing(takinginto account the listed invest-ments in which Vukile has astake) of 36.3%.

In order to mitigate currencyrisk from the offshore invest-ments, over 70% of forecaststerlingandeuro income(fromAtlantic Leaf and Castellana re-spectively) has been hedgedover the next three years.

Vukile delivered growth indistributions for the 2018 finan-cial year ended March 31of

the year amounted to 21%.The SA portfolio is defensive

and well-positioned to benefitfrom an increase in consumeractivity.

But until this happens, theprimary driver of growth for thefund will be the investment inCastellana, where acquisitionsand asset management oppor-tunities can enhance returns toshareholders.

Vukile's management isguiding full-year growth of be-tween 7.5%and 8.5%for the2019 financial year.

weighted average cost of fund- 7.7%,and grewits net assetval- Kelly Warding to 5.74% per annum. ue per share by 7.6%to R20.10. Investment analyst, Metope

The balance sheet remains Total shareholder return for Investment Managers

i

LEASEEXPIRYPROFILE PRICEVSSECTOR TOP FIVE GEOGRAPHICALvacant|M SHAREHOLDERS_ spREAD

2018 Pim data 120 Shareholder 's % Share by value

%2019 co 14.912020RN202RK 100 ig

03% SAlisted l "de

0 10 20 30 40 so|| Pr9eetnoe so 554(% of lettable area) 2016 200 2018 I Southern Africa -74%

SOURCE:VUKILEPROPERTYFUND source:ress BE Spain- 21%WUK-5%

SECTORAL SPREADby value

VUKILEPROPERTYFUND(asatMarch312018)

Head

W Retail -91%W industrial -3%H Office-4%E Motorrelated-1%HKOther-0.5%

SOURCE: VUKILE PROPERTYFUND