Vukile Property Fund bullish about retail sector

Vukile Property Fund says people still enjoy the experiential nature of physical retail, thus putting the company in a strong position for the future.

Vukile owned Los Arcos centre in Seville Spain

“As lockdowns lightened, customers flocked back to our malls”, reports CEO, Laurence Rapp.

“Sales rebounded even faster than footfall, continuing the trend of bigger shopping basket sizes with less frequent visits and more focused shopping.”

In its financial results, the company reveals that rural and township malls show consistent outperformance on both sales and footfall.

Value shopping centres with large exposure to grocers and essential services did well during lockdown levels, with strong sustainable sales growth.

However, commuter centres remain under pressure with reduced sales and footfall, points out Rapp. Commuter centres generally incorporate or are near commuter facilities like taxi ranks, bus stations and train stations, or a combination of these.

“Regional malls are the largest contributor to softer sales and footfall in the portfolio, with value, community and neighbourhood centres showing consistent improved performance.”

A regional mall has the significant size, retail variety, access and appeal to attract customers from a wider radius (region) beyond its location.

Laurence Rapp

In South Africa and Spain, the fund offered around R467m of rental relief to help its tenants sustain their businesses.

Rapp says Vukile’s Southern Africa portfolio showed sustained performance with improvements in key operating metrics.

Like-for-like trading density grew by 1.7%, rent collection was 98%, vacancies reached 3.2%, with retail retention rate at 90%. The fund has quality tenants and 80% of these are national retailers.

According to Rapp, there is a growing demand for unlisted retailers in rural and township malls. Retailers such as Power Fashion, Studio 88, OBC Chicken, and Pedros Chicken, among others, continue to open new stores.

Spanish vacancies were 1.7%, rent collection rate was more than at 95%, with 94% of retail space let to national and international tenants.

Rapp says supermarket, DIY, household goods, and sports have been the best-performing sectors since the start of the pandemic.

“Bricks and mortar remain critical in omnichannel strategy (online and offline), with 60% of our retailers planning to invest in improving their physical stores. Another 84% believe their customers prefer physical stores vs online shopping.”

Vukile has assets valued at R33.6bn, which include South Africa (49%) and Spain (51%), through its 82.5% held Madrid-listed subsidiary, Castellana Property Socimi.

For the period ended 31 March 2021, Vukile declared a cash dividend of 101.04 cents per share to be paid out in July 2021.

The company reduced its debt by R3.1bn during the year, primarily due to the sale of Atlantic leaf (R1.1bn), asset sales (R231m), and the rand recovery against the euro (R1.8bn).

Vukile performed admirably, ensuring operational excellence and balance sheet strength. We are emerging from the pandemic in a robust financial position with a strong operating platform.”

Changing retail landscape

Rapp says that Vukile’s core competency in active asset management and growing capability in data-driven customer centricity places it advantageously for the structural shifts in retail that have accelerated over the past year.

Bloemfontein Plaza

“Retail is more exciting and dynamic than it has ever been, and has become a major source of innovation. Malls are changing and finding ways to stay relevant and be even more enticing.”

While the future of retail will be both online and offline, it will be singularly customer-driven. To this end, Vukile has invested R22m in its in-mall Wi-Fi network, currently available in 16 malls, with nearly four million registered users.

Vukile has also launched its Waya Waya app and is reaping the rewards of its investment in Fetch, a geolocation data service. An internal team will analyse data from the Fetch and Wi-Fi customer base to devise new strategies that add value to tenants.

“We predict that retail will become an operating asset class and not just provide a physical space to shop. Understanding big data is an important trend going forward. Happy tenants equals more demand for space, and future growth in value for retail assets,” he adds.

Edited by Gudrun Kaiser

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