Engineering News

Vukile Property Fund has reported 3.2% growth in its distributable earnings a share for the financial year ended March 31.

CEO Laurence Rapp says Vukile has had a “very strong year and has delivered a stand-out set of results” where operationally, the company’s portfolios in South Africa and Spain both fared well and achieved all key targets and metrics.

The JSE-listed retail real-estate investment trust (Reit) has 52% of its assets in Spain through its 82.5% held subsidiary Castellana Properties, which reported that vacancies were contained at a low 1.8%, as well as a 10.8% growth in rentals on renewals and new lets, and a 99% rental collection rate.

Castellana has a blue-chip tenant mix with 93% of its rentals coming from international and national tenants.

The South African portfolio, meanwhile, delivered another solid performance, with Vukile’s asset management core competency adding value against the backdrop of a worsening economy, Rapp says.

Like-for-like trading density growth of 3.4% was boosted to 5.1% with asset management interventions, specifically the successful redevelopment and launch of the Pine Crest and Maluti Crescent centres.

Vukile’s South African retail vacancies were a low 2.9% an it achieved an 84% retail tenant retention with positive reversions of 1.1%, and 6% like-for-like net income growth from its retail centres.

With the advent of Covid-19, Rapp says Vukile has taken a disciplined approach with its primary focus being the health, wellbeing and safety of customers, tenants and staff.

In this regard, virologist Professor Barry Schoub was appointed as a special adviser to Vukile to develop hygiene protocols for its retail centres in South Africa and Spain, resulting in immediate, high-impact interventions that make its shopping centres safe and welcoming.

In line with new virus curbing protocols, both Vukile and Castellana increased spending on cleaning, sanitising, personal protective equipment, staff training, signage, physical distancing markers and awareness campaigns to ensure the operational excellence necessary to create sanitised, comfortable and conducive environments for tenants and customers alike.

In adopting a cooperative approach in working with tenants to manage the impact of the lockdown, Rapp says Vukile played a leadership role in the Property Industry Group and adopted its relief guidelines.

Vukile offered R108-million in relief to tenants for the three months from April to June, of which R49-million is helping to sustain small, medium-sized and microenterprises, which make up only 20% of the portfolio.

Vukile has concluded deals with 19 of its top 20 tenants, representing some 56% of its rental income, which will all be paying full rentals from June.

“Now is the time for responsible corporate leadership and working together in a cooperative way to stabilise the industry and economy,” Rapp says.

Post-period, in April, during the hard lockdown in South Africa, Vukile’s shopping centre footfalls were around 32% of the prior year’s number. This increased to 70% in June.

Township, commuter, rural and value centres, which comprise 81% of Vukile’s local portfolio, have outperformed their urban counterparts and are leading the country’s retail recovery.

By the end of May, trading densities were ahead of May 2019.

Castellana, meanwhile, successfully reopened its shopping centres in Spain in the final week of May and the centres indicate trading at about 65% of their pre-Covid-19 footfalls, but customer conversion rates and spend per head seem to be increasing, which Rapp said “points to a relatively lighter impact on sales”.

The Covid-19-related lockdowns have accelerated inevitable changes in the retail landscape and fast-tracked the rate of change in the physical shopping experience, which Rapp said “Vukile is embracing” through providing dominant shopping centres with strong trading environments and increasing customer analytics capacity to add further value to tenants.

Further, Vukile can comfortably meet all its debt requirements in South Africa and Spain, with an interest cover ratio of 5.8 times, as the company benefits from diversified funding sources and has engaged actively and transparently with funders during the Covid-19 crisis.

Vukile has already refinanced 77% of debt maturing in the 2021 financial year.

However, with the remainder of 2020 likely to be very challenging for business in general, Rapp says 2021 is forecast to bring a strong retail rebound in Spain.

“The return of shoppers and sales with the lifting of the hard lockdown in both South Africa and Spain is outperforming initial expectations, which is encouraging.”

Vukile has deferred the declaration of a final dividend for the 2020 financial year, pending the outcome of industry-wide consultation with the JSE and National Treasury.

Given the material uncertainty in the market, Rapp also says it is “too early” for Vukile to provide dividend guidance for the 2021 financial year or to commit to paying an interim dividend for this period.