Vukile to maintain cautious approach as listed property sector recovers

The volatility in the sector and movements in share prices continued to be “quite extreme”, which made long-term planning more challenging, Vukile CEO Laurence Rapp said.

JSE-listed property group Vukile Property Fund intends to maintain a cautious approach as the listed property sector finds its feet, accoding to CEO Laurence Rapp.

The volatility in the sector and movements in share prices continued to be “quite extreme”, which made long-term planning more challenging, Vukile CEO Laurence Rapp said. But the market would settle and more opportunities would return to the listed property sector once fixed property prices were revised downwards.

The performance of listed property stocks, including Vukile, has been at the mercy of bond yields, which have weakened since May and have been highly volatile. Listed property and bonds are closely correlated as they are both income-generating investments.

Meanwhile, a number of listed funds have reported that some acquisition opportunities have been abandoned due to exorbitant fixed-property prices. However, price weakness in the listed sector is expected to filter down to the direct property market in coming months, thereby making property prices more reasonable.

Mr Rapp said Vukile would continue to pursue earningsenhancing opportunities, including better internal efficiencies and acquisition opportunities.

A large focus would be on bedding down the fund’s Encha Properties deal, which involved the acquisition of governmenttenanted buildings from Encha and a strengthening of Vukile’s black economic empowerment credentials.

The Encha deal, as well as Vukile’s acquisition of 20 properties for R1.5bn from Sanlam and the acquisition of a 50% stake in the East Rand Mall for R1.1bn, were the fund’s three major deals which helped push its asset base from about R5.3bn two years ago to about R10bn, Mr Rapp said.

After the Encha deal, Vukile’s portfolio is about 53% retailfocused, while 10% of the portfolio is let to national government departments, 3% to a hospital, 11% is industrial and the balance of the portfolio is office space.

Mr Rapp said the redevelopment of Randburg Square, at a cost of more than R200m, had “been a very positive project for us”. The project was near completion and would introduce about 20 new shops. Initial indications were positive, with footfall up more than 20%.

Mr Rapp said Vukile’s portfolio was in a better position than two years ago, largely thanks to acquisitions and disposals. Vukile was well placed and still looking for opportunities.