Vukile’s aggressive asset-rotation strategy is starting to gain traction, especially in Spain, as capital from mature assets is redeployed into higher growth opportunities that can be spun into high-income generating assets.
The nine retail parks recently sold to Ares Asset Management were originally purchased from the same company in 2017, marking Vukile’s first step into Spain’s retail property market.
Since then Castellana, Vukile’s subsidiary, has expanded its footprint, acquiring Bonaire, moving to acquire Berceo and taking a 35% stake in Pradera, a leading specialist retail property investment fund and asset manager.
“When we entered the transaction we planned to sell just three retail parks. But reverse inquiries for the entire portfolio came in and in the end we sold to Ares — who, coincidentally, had originally sold the assets to us and have now bought them back,” said Vukile CEO Laurence Rapp in an investor call on Tuesday.
According to Rapp, Castellana has grown its Iberian portfolio to nearly €2bn, increasing the size and value of its assets. Strong investor demand for Spanish retail parks pushes prices higher since retail development remains limited in Spain.
“The proceeds from the sale, with our October capital raise and existing cash, will be redeployed almost immediately into new assets. One such centre, bought for €108m on a 7% yield in northern Spain, gives us strong performance and geographic diversification. It comes from a private equity seller, is well-let with key tenants and was previously undermanaged — a very strong asset,” said Rapp.
More transactions in the pipeline
In addition, he said other transactions are in the pipeline and will be announced in due course and that all are pre-funded, ensuring the asset rotation delivers accretion with no slippage of income.
He noted that the 35% stake in Pradera is important from a strategic point of view even though financially it is not a large transaction. Pradera is a specialist retail property investment fund and asset manager with a 25-year track record across the UK, Europe, China and the Middle East.
“Pradera has an excellent track record. Its founder, Colin Campbell, sold 49% of the business years ago, which was later bought back after the partner went into liquidation. Colin wanted to bring in a management team as shareholders and a partner with a bigger balance sheet to potentially take him out one day when he retires, so we started with an initial 35% stake,” Rapp said.
Rapp said he could not disclose the exact amount, as it was a private transaction, but confirmed that the stake cost Vukile less than R100m.
“Pradera manages €5bn in assets on behalf of 60 investors and has a presence in 10 countries. Through this investment, Vukile has gained the ability and capacity to enter other markets. While we are not actively expanding into multiple markets at the moment we are evaluating opportunities and considering which markets make the most sense to enter,” Rapp said.
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