Vukile Property Fund upgrades growth forecast, plans R5bn investment

Vukile Property Fund has upgraded its full year guidance and has a strong pipeline of potential new property deals that may see it spend R5 billion of cash over the next six months of its 2026 financial year, CEO Laurence Rapp said Wednesday.

The group, which holds 53 assets between South Africa, Portugal and Spain, on Wednesday reported a 9% increase in half-year dividend per share (DPS), while guidance for the 2026 year was now at least 9% growth in dividend per share and funds from operations (FFO). Previously the forecast was for around 6% growth in the two metrics.

About two-thirds of Vukile's assets and net property income are generated in two of Europe's major economic drivers, Spain and Portugal, through its 99.6%-held subsidiary, Castellana Properties. The countries are among the strongest growing economies in Europe at present, while the group's South African retail portfolio is also focused on a "sweet spot" in the South African market, on township, rural, urban, and commuter malls, said Rapp.

The South Africa portfolio generated like-for-like net operating income growth (NOI) of 10% and 8.7% NOI in Iberia. The South Africa portfolio value grew by 5.9%, while the value of Castellana's properties increased 2.3%, with both figures driven by net income growth only, and which were expected to continue to increase,

Rapp said in a briefing that.vacancies remain exceptionally low at 1.8% in the South Africa portfolio, while Castellana's €1.8 billion portfolio had marginal vacancies of 1.3%. He said Vukile had significant liquidity of nearly R7.65bn available to deploy into suitable growth opportunities, and an active pipeline of financially accretive and strategically aligned deals in Iberia and South Africa was expected to close by mid-2026.

He said the South African portfolio continued to deliver consistent outperformance, benefiting from operational efficiencies, and an improved macroeconomic environment.

He said every major fashion retailer in the South Africa portfolio had reported real growth over the past six months, which was an indication of how well the group's tenants were trading. He said they were confident that this trend would continue into the second half.

Some recent trends at their local malls included the addition of smaller grocery anchor tenants, following the growth of the value grocery segment, including Boxer and Spar's Savemore stores, which typically required smaller stores of 1000 to 1500 square metres.

Another strong growth area in the group's malls was cellphones, with many large tenants introducing cell phone stores within their retail offerings, which were offered to clients as part of a financial services solution.

The total portfolio recorded trading density growth of 5.4%, with the township and rural portfolio outperforming at 5.9%. Portfolio footfalls grew by 1.9%.

The redevelopment of Mall of Mthatha added significant value to the South African portfolio, transforming the centre into a top-tier retail destination. Since being acquired in May 2024, the mall's turnaround had delivered measurable gains with the asset value up by nearly 40%.

The group's top line growth was also being supported by sustainability initiatives, such for electricity and water usage, that operate a growing profit centre, said Rapp.

Vukile has a solar PV capacity of 38.2MWp across 41 installations, with 2.23MWp added in the six months and more to come.

GCR recently upgraded Vukile's credit rating to AA+(za) with a stable outlook, while Fitch upgraded Castellana's rating to BBB, with both promotions signalling confidence in strategic direction, and financial and operational strength.

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