Vukile Property Fund says its SA and Spanish portfolios continue to experience high demand for retail space, resulting in reduced vacancies and rising rentals.
Its SA portfolio recorded like-for-like annualised net operating income growth of 5.1%, with vacancies at 2%. Rental reversions improved to 2.4% from a negative 2.4%, with annualised trading densities increasing 3.5%.
The Spanish portfolio recorded normalised net operating income growth of 13% and 1% vacancies; positive reversions of 8.3% (11.6% indexation) with 95% of its retail space let to international and national brands.
“Vukile’s strategy of owning dominant assets in their catchment areas and operational focus on the consumer as the source of value creation, has become our differentiator in driving performance,” said CEO Laurence Rapp.
Rapp said a highlight for the six months to end-September has been the strong positive reversions outcome in the past five years. As a result, demand for space is high and vacancies remain low with steady growth in base rentals.
Vukile is a JSE-listed retail-focused real estate investment trust (Reit), differentiated by its sector specialisation and international diversification. Its retail assets in SA and through its 99.5% held Madrid-listed subsidiary, Castellana Properties Socimi, is valued at R39bn. About 60% of its assets are in Spain and nearly 50% of its earnings in euro.
Its SA portfolio comprises 33 commuter, rural, township and urban malls valued at R15.4bn. Some of its shopping centres include East Rand Mall and Daveyton Mall in Gauteng, Hammarsdale Junction, Phoenix Plaza, KwaMashu Shopping Centre and Pine Crest in KwaZulu-Natal.
Vukile signed 266 lease renewals and 81 new leases as many national and independent retailers increased occupancy within the portfolio.
In-contract escalations were recorded at 6.3% with new leases concluded at an average escalation of 6.6%.
“In the short-term, we will focus on strengthening tenant and community relationships, as well as researching consumer behaviour to improve our retail offerings,” Rapp said.
Rapp said Spain was outperforming the eurozone and employment was at its highest level since 2008. Households were both saving and spending more, indicating fiscally responsible consumers, and that was being supplemented by growing international tourism — factors that bode well for the Spanish portfolio.
More than 95% of the portfolio’s gross lettable area is let to international and national retailers. The portfolio of 16 properties is valued at €1,022m. Castellana increased its stake in Lar España from 25.7% to 26.29%
“We continue to explore further growth opportunities to increase income through repositioning, extensions and value-add initiatives to existing assets.”
Rapp said that due to weak share prices — trading at large discounts to net tangible assets with good yields — there are opportunities to acquire assets directly and in the listed sector. However, capital constraints remain a challenge, hindering Castellana from taking advantage of attractive opportunities.
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