Vukile distribution lifts on improved portfolio composition

Vukile Property Fund CEO Laurence Rapp said significant progress had been made in the last six months in developing a better quality and lower risk portfolio.

JSE-listed Vukile Property Fund today declared a distribution of 54.81c per linked unit which represented growth of 5.0% for the six months ended September 2013.

Vukile said the portfolio had changed dramatically over the past year, with highlights during the six months under review including the relaunch of Randburg Square following a three-phase R207m upgrade; the completion of the R1bn Encha transaction in which Vukile acquired four government-tenanted properties; the acquisition of 50% of East Rand Mall for R1.1bn; the acquisition of Hammarsdale Junction for R194m; and the sale of R287m worth of higher-risk properties.

The group’s net profit available for distribution was R343.8 million — a rise of 28% from the comparable period.

Chief executive Laurence Rapp said significant progress had been made in the last six months in developing a better quality and lower risk portfolio.  "This can be seen by our strong retail (52%), sovereign tenant (10%) and hospital (3%) assets now representing the lion's share (65%) of the overall portfolio," he said.

Net profit from property operations, excluding straight-line rental accruals, increased by 17.6% to R406.9 million (September 2012: R346.0 million) with the portfolio showing like-for-like growth of a very credible 8.1%.  Vacancies, measured as a percentage of gross rentals, decreased to 6.7% from 7.1% in March 2013.  The acquisitions and disposals have also significantly improved the lease expiry profile of the portfolio.

New leases and renewals with a total area of 150 579 metres squared and a contract value of R538.3 million were concluded.  78% of leases to be renewed during the review period were renewed or are in the process of being renewed.

Looking ahead, Rapp said that while he did not expect to see a significant improvement in the macro operating environment, the portfolio was well positioned to produce better growth going forward.  "Our retail assets continue to perform well and we have been encouraged by an increase in demand for industrial space. The office sector remains the most challenging though," he said.

"The business is in good shape and we are confident of meeting our distribution growth guidelines for 2014 of between 4% and 6% off a normalised base of 120.44 cents per linked unit and thereafter seeing a healthy increase in distribution growth for 2015.”