VUKILE PROPERT Y FUND...CEO Laurence Rapp ukile Pr oper ty F und' s turnar ound str ategy , which...
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The copyright act of 1978 (as amended) prohibits the reproduction of this copy IN ANY FORMAT, (See Clause 4 Terms and Conditions) without prior permission of the original publisher. Publication FINANCIAL MAIL PROPERTY HANDBOOK Page 88- 89 Date Thurs 26 July 2018 AVE (ZAR) 58925.5 VUKILE PROPERTY FUND CEO Laurence Rapp ukile Property Fund's turnaround strategy, which began several years ago, is bearing fruit as the fund has repositioned itself as a focused retail player, with in vestments in SA, the UK and., more recently, Spain. The fund, which first listed on the JSE in 2004, became the first property companyto be awarded real estate investment trust(Reit)statusback in 2013 and has a 14-year track record of unbroken growth in distri butions. Led by CEO Laurence Rapp. Vukile has a portfolio worth R21.6bn, which includes equity investments in property com panies Fairvest Property Hold ings (R595m),Gemgrow Prop erties (R790m), Atlantic Leaf Properties (RL2bn), and Castel lana Proper ties (R4.5bn) The latter is an unlisted Spanish Reit, which Vukile is hoping to list on the Madrid Stock Exchange by August 2018. Vukile's SA portfolio has transformed in recent years from one that was predomi nantly office- focused with sovereign assets acquired in the unbundling of the Sanlam port folio, to a retail dominated Reit Thedirect portfolio consists of 46 properties valued at R13.2bn (excluding Vukile's 80% interest in Moruleng Mall in Rustenburg),spanning 810,398 m* of gross lettable area (GLA). The average value per prop- erty was R288m as at March 2018, up from R196m at March 2017, which reflects the success of management' s turnar ound strategy and the concer ted fo- cus on improving the portfolio quality through active asset management and the disposal of noncor e proper ties. A significant part of this turnaround was the asset-swap agreement with Synergy In- come Fund (now named Gem- grow) in 2016, which resulted in Vukile swapping a portfolio of older office and industrial build ings for a retail portfolio of sim ilar value. Vukile holds a passive stake in Gemgrow, which it will look to recycle as currency when the timing and market pricing con ditions are favourable. Vukile's largest property as set is a 50%stake in Boksburg's East Rand Mall, which it co-owns in an undivided share with Redefine Properties. The revamp and extension of the mall has positionedit well for growth, with an average an- nual footfall of 10.5mand a cur rent vacancyof 0.5%. Of the company's SA port- folio, 41% is Gauteng-based, in- cluding the East Rand Mall, Soweto's Dobsonville Mall, Dav eyton Shopping Centre, Mead- owdale Mall and the Randburg Square. The company entered the Spanish market in July 2017, fol- lowing an economic recovery in the countr y.
Transcript of VUKILE PROPERT Y FUND...CEO Laurence Rapp ukile Pr oper ty F und' s turnar ound str ategy , which...
The copyright act of 1978 (as amended) prohibits the reproduction of this copy IN ANY FORMAT, (See Clause 4 Terms andConditions) without prior permission of the original publisher.
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
