Highlights from Vukile Property Fund’s pre-close update for the 30 September 2023 interim period.
South African portfolio:
The defensive nature of the South African portfolio and tenant mix, the dominance of Vukile’s assets and active asset management activities continue to deliver excellent results.
- Improved footfalls (7% yoy) and sales (up 3.6% yoy)
- Trading density growth (3.5% yoy) in all main segments, led by township (5.3%) and urban (4.8%) shopping centres
- Vacancies are steady at 2.0% with strong demand for space across all portfolio segments
- Rental reversion positive at +2.4% and strong collection rate of 100%
- WALE of 3.2 years extended by recent transactions to 4.2 years.
The Castellana portfolio continues to lead in the Spanish market in operating performance metrics with the impact of our asset management interventions delivering great returns.
- Impressive growth in footfall (7.4% yoy) and sales (9.7% yoy)
- Highest occupancy (98.8%) and collection rates (98.7%) in its market
- 9.31% average rental growth
- Lar Espana proving to be a great investment.
Debt and treasury:
Overwhelming support from the local debt capital markets was evidenced by the very successful bonds issuance in August 2023 that attracted significant investor demand and priced below guidance.
- Balance sheet metrics in line with FY23
- Group LTV anticipated to be c.44% and Group ICR at c.3 times
- Strong liquidity with R2.7 billion of cash and undrawn committed facilities (2.1 times covered)
- All FY24 expiries have been repaid, refinanced or renegotiated
- GCR reaffirmed corporate long-term credit rating of AA(ZA) in August, with a stable outlook
- Managing interest rates proactively, with a focus on Castellana’s €256 million facility’s fix maturing in September.
The board refresh process is underway with the appointment of two independent non-executive directors – Jon Zehner, Vice Chairman of LaSalle Investment Management, one of the world’s leading real estate investment managers, and James Formby, former chief executive officer of Rand Merchant Bank (RMB). They will add significant international and capital markets experience to the board as Vukile seeks to further strengthen the board with the right balance and skills for the longer term.
Energy and sustainability
- Aim to increase PV to 30 MWp by FY25 (19% of portfolio energy consumption)
- Plan to add 7 060KWp to the existing 14 847KWp in FY24
- 2 001KWp has already been completed in FY24 and a further 5 059KWp is under construction.
- BT-Ngebs should transfer in Q4 FY24. Previous asset sales proceeds to fund R400m acquisition at c. 9.25 yield
- Vallsur and El Faro value-add projects are accretive and asset-enhancing. Funds are in place to lift El Faro ownership to 100%
- As signalled to the market, Vukile continues to seek new opportunities at very attractive yields in Europe in disciplined deals that make both financial and strategic sense. However, there are no transactions currently on the table.
Vukile confirms its guidance for FY24 at:
- Growth in FFO per share of 3% to 5% (148cps to 152cps)
- Growth in Dividend per share of 7% to 9% (120cps to 123cps)
Laurence Rapp, Chief Executive Officer of Vukile Property Fund, says, “We are pleased to confirm our guidance based on our actual performance to date, with all operating metrics showing trends of sustained growth. The defensive nature of our South African portfolio and its nodal dominance is a buffer against the increasingly more difficult macro environment with higher interest rates affecting consumers. Trade in Spain remains positive and consumer confidence is buoyant for now. However, there is still potential for higher interest rates to influence consumer sentiment. The impact of higher finance costs has already been factored into our forecasts.”