Vukile's interims signify 10th consecutive year of growth
Vukile Property Fund signalled its 10th consecutive year of growth, saying it had delivered on market guidance and established a decade-long track record of unbroken growth in distributions and positive performance for investors.
On Monday the JSE-listed property group released its financial results for the year to 31 March 2014, marking its tenth consecutive year of growth since listing on the JSE in June 2004.
In a media brief announcement, the company said in its 10 years, It has delivered compound annualised growth in total returns of 23.6%, and had significantly "bulked up" its asset base from R3,1 to R10,3 billion.
A significant portion of growth has been achieved in the last three years, where the value of its portfolio increased 92.0% from R5,35 billion to R10,3 billion. Vukile’s market capitalisation has increased from R1,3 billion at listing to R8,5 billion today.
The Fund reported that it had achieved its full year distribution growth by 5%, which it said was a coup given the major restructuring of its portfolio.
Like-for-like growth in net property revenue was 6.8%. When taking into account the special distribution of 13.83 cpu paid in December 2013, growth in total distributions for the year was 6.6%.
In the period, the group acquired a 50% stake in East Rand Mall for R1,1 billion and a sovereign tenant portfolio for R1.04 billion from Encha in a ground-breaking transformation deal that was finalised in August 2013.
It also realised R287 million by selling higher-risk non-core properties. It invested in various upgrades and improvements to its properties to ensure their ongoing competitiveness and sustainability, most notably in the complete revamp and upgrade of Randburg Square shopping centre at a cost of R207 million.
Today, 66% of Vukile’s total property portfolio is made up of low risk assets in the retail (53%), sovereign tenant (10%) and hospital (3%) sectors. Vukile, as an early entrant into the lower income retail market, has built a portfolio of 28 retail assets carrying a national tenant component of 80%.
Vukile reported positive performance across all key portfolio metrics for the year. It achieved positive rental reversions on renewals across all sectors, but especially in the retail sector where reversions are up by 7.8%.
New leases and renewals of 285,098sqm with a contract value of R1,06 billion were concluded during the year, and 91% of leases to be renewed during the year were successfully renewed. It also reduced vacancies from 7.1% to 6.7%, while it increased the weighted average base rentals by 12.5% during the year.
Vukile acquired a 34% stake in Synergy Income Fund Limited from Liberty Group by purchasing 52,3 million Synergy B linked units for R338 million. This boosted Vukile’s investment exposure to retail property serving the lower-income market and its exposure in the Western Cape region.
“We will explore further opportunities with Synergy in line with our view that all transactions must be value enhancing and in the best interests of Vukile and its unitholders,” says CEO Laurence Rapp.
Vukile also entered a transaction with Fairvest Property Holdings where it sold four properties to Fairvest in exchange for a 31.5% stake in Fairvest. The R235 million transaction was effective 1 January 2014.
Vukile closed the year with a loan-to-value ratio, net of cash, of 30.8% and 88.0% of its debt hedged at an all-in weighted average interest rate of 8.2% for the year.
“Notwithstanding the dual headwinds of a stubbornly sluggish economy and rising interest rates, distribution growth for the listed property sector is forecast at between 7% and 8% for the next year. We are confident that Vukile will deliver growth in distributions at least in line with the top end of this projected sector growth,” says Rapp.