Having established itself as a retail-focused real estate investment trust (Reit), Vukile Property Fund is turning its attention to an offshore expansion.
Vukile set for expansion into UK and Europe
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The internally managed Reit, with a property asset base of R16bn, owns a direct retail-focused portfolio in SA and an indirect portfolio of Reits. Its Reit investments include the local retail-focused Fairvest Property Holdings and the UK-focused Atlantic Leaf Properties.
Vukile’s international investment strategy began with the acquisition of 26% in Atlantic Leaf. This JSE-listed company was formed by South Africans who invested in various commercial properties in the UK.
Vukile CEO Laurence Rapp said Atlantic Leaf had provided Vukile with a richer understanding of European markets. His management was looking at more opportunities in the UK and western Europe. It had considered investing in North America but had decided not to for the foreseeable future.
“Atlantic Leaf provides the perfect launchpad to deepen our international exposure, while building our high-quality, lowrisk portfolio.
“Vukile’s strategy favours developed markets and we are exploring good buying opportunities internationally. Notwithstanding the uncertainty around Brexit, there are opportunities in the market, made even more attractive by the weakening of the British pound,” he said.
Vukile grew 7% in the halfyear to September, in line with the guidance it gave to the market.
Domestically, Vukile would soon become a retail property fund with 90% of its asset base consisting of shopping centres.
To enhance its retail focus, Vukile sold its sovereign portfolio during the reporting period for R1.2bn. The yield was used to reduce Vukile’s debt, lowering its gearing to 23.9%.
It also upgraded East Rand Mall and made investments into Durban Workshop and Dobsonville Mall in Soweto.
Vukile contained its retail vacancies at 3.9% of gross lettable area, achieved positive rental reversion of 6.4% and signed its new deals at 3.2% above budgeted levels.
“Locally, everything is in place to achieve our objective of transforming Vukile into a retail fund, which is the preferred asset class with lowest risk through the cycle.
“With the advent of the new Vukile, we now have a great platform for international expansion in line with our stated strategy,” Rapp said.