The SA managing director of JSE-listed Vukile Property Fund shares insight on why the group purchased the Eastern Cape mall in an R800m deal together with Flanagan & Gerard from Sisa Ngebulana’s Billion Group, expanding its presence in the thriving rural and township retail property market.
You can also listen to this podcast on iono.fm here. ADVERTISEMENT CONTINUE READING BELOW Welcome to the latest edition of The Property Pod, South Africa’s leading property investor podcast. On this weekly Moneyweb show we gain insider insights from leading CEOs and other movers and shakers in the country’s expansive property industry.
Highlights of his interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts. It looks like Vukile has been quite busy with acquisitions and capital raises, despite the rest of the Reit sector still having some tough times post-Covid. I won’t really delve into the Spain business – Vukile has also invested in Spain – because you are the SA managing director, and we had Laurence Rapp last year on the pod.
“It’s a northerly dominant asset in Mthatha. It’s one that we feel has been undermanaged over the years. It’s one that we’re buying from a potentially distressed seller. And I think with Flanagan & Gerald jointly we’ll look to really add this asset-management element to it by driving value from an asset-management perspective …
“The way that we looked at the underwriting we felt that we needed to spend quite a bit of capital, about 20% of the acquisition price, on repositioning, redevelopment and making sure that the asset is fit for purpose. And we published that we are buying this at a 9.5% yield, inclusive of our capital spend.
But with regard to this acquisition , the deal was announced back in 2022, and now it’s finalised. That’s like two years later. Is this usually the amount of time it takes to bed such a deal? I know Vukile was also planning to acquire a mall in Alex in Johannesburg, the Pan Africa Mall – which didn’t exactly work out.
“Therefore, we needed to go through a town-planning process that allowed us to subdivide the erf and acquire only the mall – and not the hotel and the casino. And I guess that’s what’s taken us 18 months to make sure that that’s closed, and working with the council; and the mayor has been particularly supportive of the transaction.
“It has all the hallmarks to be a super-regional in its context, and we just feel that a couple of key issues from a design management tenant mix perspective need to be rectified.” “So we’ve identified three or four significant downsize opportunities where we can introduce new entrants with F&G, and I think this is something that once we’ve executed on we’ll definitely then drive the cash flows to a yield of around double digits. So quite exciting.”Massmart doesn’t plan to close Game storesGive us some history on the centre size-wise and location. I mentioned Sisa’s Billion Group was originally involved.
“I think one other thing in the Mthatha region that was exciting to us when we saw this opportunity is that – similar to the mall that we own in Maluti in the eastern Free State in Qwaqwa – the economy in and around the area has two layers; it has a local municipality and also houses the district municipality. So it has a significant kind of fiscus spend and underpin.
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