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Vukile Property Fund reported 7.7% growth in dividends to 168.82 cents per share for the year to 31 March 2018 on the back of higher second-half distribution growth of 7.9%.
Vukile’s full-year returns are in the upper range of its market guidance and extend its 14-year track record of unbroken growth in dividends for investors. The JSE-listed real estate investment fund (REIT) reported distributable income totalling R1.3bn and its net asset value increased 7.5% to 20.09 cents per share.
The company said its results reflect the solid operational performance driving its core SA retail property portfolio, "which produced good metrics in a relentlessly tough operating environment".
"It also showcases Vukile’s strong balance sheet, and entrepreneurial deal-making resulting in its landmark strategic international expansion in Spain," the company said in a statement.
Laurence Rapp, CEO of Vukile Property Fund, said it has been a milestone year for Vukile, which holds 21% of its assets in Spain. He said Vukile expects to deliver dividend growth of between 7.5% and 8.5% next year.
“Vukile will intensify its focus on capital allocation and strategic consistency. We will continue our specialised investment in the defensive retail sector in SA with expansions, upgrades, and data-driven asset management that adds value to our properties," said Rapp.
"We have an appetite to invest in SA with value-accretive transactions at the right price. Internationally, for the short to medium term, our activity will be fixed solely on the Spanish market to drive home the advantages of our investment’s scale and substance, on-the-ground operations, and best-of-breed REIT structure.”
Vukile closed its financial year with total asset R21.6bn. This comprised R17.3bn (74%) in SA, R4.5bn in Spain (21%) and R1.2bnb in the UK (5%).
Its directly held domestic market portfolio is valued at R14.5bn, with 91% retail real estate assets that achieved like-for-like net income growth of 6.5% and positive reversions of 5.1%.
Vukile’s domestic retail portfolio is made up of 46 properties valued at R13.2bn and with a national tenant base of about 80%. The company said strong operating performance further reduced its retail portfolio vacancies from 3.6% to 3.4%.
The portfolio has a weighted average lease expiry profile of 3.7 years. It achieved an 87% tenant retention rate, contractual rental escalations ahead of inflation at 7.1%, and rental reversions of 5.2%. The average rent-to-sales ratio is 6%.
Its small regional and community centres delivered 3.6% trading growth and its rural retail portfolio achieved as much as 7%.
“We are thrilled to have achieved this in a difficult operating environment. While we are buoyed by the improving political and economic climate in South Africa, and the resultant uptick in consumer confidence, we are yet to see a tangible improvement in the trading environment. Moreover, we believe this is unlikely to come about in the next 12 months,” said Rapp.
“We anticipate another challenging year, largely in line with the operating conditions of the past year. That said, Vukile is confidently positioned for future growth with a stable, defensive SA retail portfolio, a growing Spanish market position, a solid balance sheet as well as sharply focused strategies for both the geographies and sector in which we invest.”
Vukile has started redeveloping Maluti Crescent in Phuthaditjhaba with capital expenditure of R367m and a projected yield of 8.3%. When finished in April 2019, it will be the area’s biggest modern enclosed mall.
Vukile’s Pinecrest Shopping Centre in Pinetown, KwaZulu-Natal, is being expanded with a new mall, upgraded food court and fresh retail mix. The project’s capital cost is R167m with a 7.9% projected yield.
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