Vukile Property Fund expects to reap benefits of restructuring

Posted On Wednesday, 27 November 2013 07:54 Published by
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Vukile says it has restructured itself with the aim of significantly increasing returns from 2015.

Maurice ShapiroVukile Property Fund (VKE) said on Monday that it had restructured itself with the aim of significantly increasing returns from 2015.

The group reported on Monday‚ in its financial results for the six months to September‚ that its portfolio had changed "tremendously" in the six-month reporting period as it restructured itself to increase its broad-based black economic empowerment (BBBEE) ownership to more than 20%. This empowerment boost was achieved when Vukile completed a R1.04bn transaction in which it acquired four government-tenanted properties from the Encha investment group.

"This Encha deal is highly important. This deal increases BBBEE ownership‚ allows them to properly manage its government portfolio‚ and get a 10-year lease. It will be value-enhancing‚" Alternative Real Estate fund manager Maurice Shapiro said.

During the six-month reporting period‚ Vukile also successfully relaunched Randburg Square shopping centre after an extensive three-phase‚ R207m upgrade.

The group also bought 50% of the East Rand Mall for R1.1bn and Hammarsdale Junction for R194m. Vukile sold off R287m worth of higher-risk properties. The acquisitions and disposals collectively greatly enhanced the overall quality of the portfolio‚ said the company.

On the distribution income front‚ Vukile achieved 5% in the six-month period to September‚ which was below the listed property sector average. But the group said its portfolio was positioned for strong returns in the future. Vukile increased its normalised distribution by 5% to 54.81c per linked unit‚ from a base of 52.2c per linked unit in the six months to September last year.

In the latest reporting season‚ the average distribution growth in the listed property sector was about 7%. CEO Laurence Rapp said the group had developed a better-quality and lower-risk portfolio which would grow its distributions at a gradual pace. "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 120.44c per linked unit and thereafter seeing a healthy increase in distribution growth for 2015‚" Mr Rapp said.

Mr Shapiro said he expected "strong distribution numbers" to come through in 2015. "This will be when acquisitions and restructuring show positives. This is a long-term play. Laurence Rapp has been busy doing very good deals‚" Mr Shapiro said.

Vukile's like-on-like portfolio‚ which was not subject to acquisitions or disposals‚ increased 8.1%‚ also impressing analysts. "This is a good performance in this environment and a key metric that is often overlooked‚" senior property fund manager at the Old Mutual Investment Group‚ Evan Robins‚ said. "The results and prospects are in line with guidance even if the guidance of 4%-6% normalised distribution growth is unexciting‚" he said.

Last modified on Saturday, 30 November 2013 13:36

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