Nick Wilson

Property Correspondent

LISTED property loan stock Vukile Property Fund is launching a R2bn commercial mortgage-backed securitisation programme.

The programme is being arranged by Absa bank to refinance Vukile’s existing bank debt and cut the cost of funding its commercial property investment.

Vukile is one of three property companies in the listed sector to initiate debt securitisation with iFour Properties being the first listed property company to announce one last year.

Vukile CEO Gerhard van Zyl said it would reduce the overall cost of Vukile’s debt from 11,2% to about 10% and would enhance returns to its unitholders.

The first issue of notes under the programme comprises a total amount of R770m. Settlement of the notes is scheduled for November 7.

Colin Young, head of asset management at Old Mutual Asset Management, said Vukile obviously initiated the programme to reduce their debt cost.

Young said debt securitisation was "definitely a trend that is going to continue" in the listed property sector.

"If you look at the US, the debt securitisation market is worth more than $500bn. To a fixed income fund manager the yield that is offered tends to be higher than government bonds," said Young.

Vukile said one key feature of its programme was that the securitised property portfolio, comprising 39 of the 52 Vukile properties, was owned directly by Vukile and not by a special purpose vehicle.