Vukile upbeat about record occupancies amid 'aggressive' retailer expansion

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Vukile Property Fund has bought Pan Africa Shopping Centre, but is waiting for city approval.
Vukile Property Fund has bought Pan Africa Shopping Centre, but is waiting for city approval.
Vukile Property Fund
  • Mall owner Vukile says vacancies in its SA retail portfolio are at the lowest level since it listed in 2004.
  • It says it's seeing 'aggressive' retailer expansion, led by value-fashion firms, but grocers are also interested in expanding.
  • But it says its CBD and urban malls continue to lag, and footfall in both are still more than 10% below pre-Covid-19 levels.
  • For more financial stories, go to the News24 Business front page.

Vukile Property Fund, which owns malls in SA and Spain, says it is reaping the benefits of aggressive retailer expansion in its part of the market, with vacancies at their lowest level since it listed in 2004, and trending downwards.

Strong demand for space from tenants focused on non-discretionary spending - such as grocers, fast-food retailers and value-fashion - meant Vukile's metrics were at odds with economic indicators, CEO Laurence Rapp said on Tuesday, when the firm reported its SA mall footfall was now at 97% of pre-Covid-19 levels.

"It really underscores the strength of our properties, of regional, nodally dominant assets," Rapp said during a media briefing. "Retailers are looking to position themselves in our part of the market."

Valued at R14.3 billion on the JSE, Vukile owns 41 malls in SA worth R14.6 billion, including the Boksburg East Rand Mall and Gugulethu Square. The firm's Spanish business, Madrid-listed Castellana, has a portfolio valued independently valued at €1.01 billion (R17.9 billion) 

Vukile said on Tuesday its like-for-like net operating income rose 4.2% to R600.5 million in its half-year to end-September, with the firm raising its dividend 16.8% to 47.32c per share, or a payout of R464 million. Vacancies in its SA retail portfolio - 96% of the assets by value - fell to 2.3%, from 2.6% previously, while rental reversions turned positive, 1.6% from a fall of 2.4% previously.

The group said footfall in its township and rural malls were now consistently ahead of pre-pandemic levels, while commuter and urban malls, despite a significant rebound, were at 86% and 88% of pre-pandemic levels respectively.

"Given the macro-economic data you'd expect to have a softer environment," said Rapp, but added the demand for space from certain retailers showed there was still vibrancy in SA's cash economy, while inflation didn't mean that consumers stopped shopping. 

The group said six of its top 10 retailers opened a total 40 new stores in its portfolio, which was led by TFG, Mr Price and Pepkor, but other tenants, such as jewellers or those in the home furnishing business, weren't faring as well.

"We are reaping the benefits of our in-house strategic leasing team, which, with access to our state-of-the-art data and statistics, has boosted the defensive nature of the portfolio with a high percentage of essential services tenants, mirroring changing shopping patterns," he said.

In Spain, Castellana continues to be in "a very good position" despite the negative macro-economic environment there, Vukile said. "Consumption declines forecasted by economists have not yet manifested in the portfolio performance, where sales are still increasing and some tenants are showing double-digit growth." Normalised net operating income in Spain rose 7.5%, while vacancies were maintained at 1.6%.

Shopping shifts

Vukile is in the midst of shaking up its portfolio as well, continuing a strategy of owning dominant regional centres in rural and township areas across SA.

Vukile continues to actively rotate its portfolio and prior asset sales were augmented with further sales of R280 million of non-core assets. Proceeds will be deployed into two strategically aligned dominant assets, being Pan Africa Mall in Alexandra, Johannesburg, purchased at a price of R421 million, and BT Ngebs City Mall in Mthatha, Eastern Cape, of which Vukile is acquiring a 50% undivided share in a joint venture with Flanagan & Gerard Property Group, for R400 million.

Rapp said the firm was still interested in further expansion in SA, and the current environment showed there was still value in the sector, "if you build the right malls."

In midday trade on Tuesday Vukile's shares were down 1.58% at R14.37, having risen 15% so far in 2022.

Click here for details on Vukile's shares as well as other info.

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