Vukile Property Fund owns about R64 billion of property, and two-thirds of it is in Spain and Portugal. South Africa's share has slipped to 30%, from about 40% two years ago, after a run of big shopping-centre purchases overseas. Chief executive Laurence Rapp would like the local slice to grow, and on a tour of the group's malls in Gauteng, the Free State and the Eastern Cape last week, he told News24 what stands in the way.
"I want to be very clear. We have a very strong appetite to buy assets in South Africa," Rapp said. The trouble is supply. Good South African shopping centres seldom come to market, because their owners have no reason to part with an asset that reliably pays rent. Centres of the quality of Sandton City or Canal Walk almost never change hands.
Why European malls come up for sale
The difference is who owns them. Overseas, shopping centres belong mainly to private equity, hedge and closed-end funds, which are paid on the return they make and only collect it when they sell. In South Africa the owners are in it for the rent. "The business model in SA is largely around cash flow, and these shopping centres are great cash cows," Rapp said. South African investors also never went through the years when international money treated physical shops as a forbidden area because of online shopping, he added.
Size makes the hunt harder still. A crop of smaller centres of 5,000 to 10,000 square metres has opened, which Rapp says are too small to move the dial, and listed property groups count themselves lucky to compete for one or two big deals in a year or two. In Europe a single centre can cost R2 billion or more, about as much as three or four comparable South African properties.
What it has found at home
Vukile has still done deals locally, mostly in the township, rural and commuter malls its South African portfolio is built around. It bought half of Chatsworth Centre in KwaZulu-Natal and all of Botshabelo Mall in the Free State, which News24 says is about to transfer from Liberty Two Degrees. In the year to March, its South African malls gained about R2 billion in value, taking them to almost R20 billion.
The malls it already owns are busy. Maluti Crescent in Maluti-a-Phofung draws more than 900,000 visits a month and turns over about R922 million a year, and Vukile has just finished a R76.1 million extension and refurbishment of Nonesi Mall in Komani. South African managing director Itumeleng Mothibeli told Business Day that retailers are getting better at selling more from less space.
It is not short of the means to buy more. Vukile has about R10 billion in cash and undrawn facilities, News24 reports, and after its first three Italian centres it is looking at three more there. Until South African owners start selling, Italy is where the next deals are lined up.
