JSE-listed real estate investment trust (Reit) Vukile Property Fund has reported strong results for the six months ended September 30, outperforming guidance.

Vukile increased its half-year dividend per share (DPS) by 9% and increased its guidance for the full 2026 financial year to growth of at least 9% in both DPS and funds from operations per share (FFOPS).

During a media briefing on November 26, CEO Laurence Rapp said the company entered the 2026 financial year in a very strong position.

“We’ve seen a really good first six months of the year,” he commented.

Vukile holds a total of R54-billion in property assets.

About two-thirds of its 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 company noted in a media release that its South African portfolio of township, rural, urban and commuter malls served some of the country’s most compelling consumer markets.

Vukile said its operational strength was evident across its well-located, high-performing shopping centres, adding that both portfolios delivered excellent performance, with like-for-like net operating income (NOI) growth of 10% in South Africa and 8.7% in Iberia.

The company said its South African portfolio continued to deliver consistent outperformance, benefiting from driving operational efficiencies and an improved macroeconomic environment.

“Strong top-line growth is supported by proactive cost management and sustainability initiatives, encompassing both electricity and water, that operate as a growing profit centre for Vukile,” said Rapp in the release.

“Structural changes, particularly around electricity supply, are most certainly making the operating environment better than it’s been in a long time and this is starting to bear fruit.”

The retail portfolio value increased by 5.9% to R17.7-billion.

Moreover, the company noted that vacancies remained exceptionally low at 1.8%, supported by active letting with rental on the new deals increasing by a pleasing 5%.

Vukile said the portfolio continued to deliver positive rental reversions, edging upwards by 2.5%. Nearly 85% of space was let to national retailers.

Increased promotional activity driven by Vukile’s shopper-first approach boosted footfall and sales growth.

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 company explained that the redevelopment of the Mall of Mthatha had added significant value to Vukile’s South African portfolio, transforming the centre into a top-tier retail destination.

Since being acquired in May 2024, the mall’s turnaround has delivered measurable gains with the asset value up by nearly 40%.

SUSTAINABILITY AS A PROFIT CENTRE

Vukile further reduced its South African portfolio cost-to-income ratio from 15.3% to a record-low 12.5%, reflecting the benefit of additional solar PV installations and targeted efficiencies.

The retail Reit’s solar PV rollout in South Africa has been highly successful, boosting margins and advancing its path to carbon neutrality. Vukile has a solar PV capacity of 38.2 MW across 41 installations, with the Reit having added 2.23 MW of capacity during the six months under review.

A further 4.42 MW of capacity is under construction, progressing towards a total target of 10.6 MW for the year, at attractive yields.

CASTELLANA 

Meanwhile, Vukile noted that Spain continues to be a major economic engine in Europe, with GDP projected to grow by up to 2.9% this year.

The economy is being driven by strong household consumption, a resilient labour market with rising wages and the lowest unemployment in nearly 20 years, and record-breaking tourist arrivals and spending.

The company explained that inflation was easing gradually, with population growth driven mainly by the immigration of skilled people.

Additionally, Portugal’s economy is on track to grow by up to 2.4% this year, driven by rising private consumption and historic high employment levels with wages expected to rise.

Inflation has eased to 2.4%, while household finances continue to improve, with higher savings and lower debt.

Vukile also noted that tourism was heading for a record year, boosting demand in key regions such as Lisbon and Madeira.

The company acquired the Forum Madeira shopping centre in Funchal, Madeira, for about €63-million at a yield of 9.5% in April and secured another asset which is under exclusivity in Spain.

The company said Castellana’s €1.8-billion portfolio remained effectively fully let, with marginal vacancies of 1.3% and more than 95% of space let to blue-chip international and national tenants. 

It achieved positive rental reversions and new lets of 7.5% – 9.55% in Portugal and 7.12% in Spain – representing impressive growth in real terms, and well ahead of economic growth in both cases.

The portfolio has a weighted average lease expiry of 8.9 years. Excellent trading metrics saw footfall up 3.5% and sales increasing by 4.2%.

BALANCE SHEET STRENGTH, CAPITAL ALLOCATION

Vukile said it had significant liquidity of nearly R7.65-billion available to deploy into suitable growth opportunities.

It has an active pipeline of financially accretive and strategically aligned deals in Iberia and South Africa, which it expects to close by mid-2026. 

Credit rating agency GCR 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, financial strength and operational excellence.

Rapp noted that the company had R2.4-billion in undrawn debt facilities.

The Reit said it continued to focus on recycling noncore assets as a way of funding further expansion in its core markets, with a number of deals in progress.

In South Africa, the company is acquiring 50% in Chatsworth Centre from Sanlam, which will remain a co-owner, with a R620-million investment representing an 8.75% yield.

The 42 400 m² dominant centre in the KwaZulu-Natal community of Chatsworth is a strategically aligned, high-performing asset and expected to transfer in December.

The company said the acquisition aligned with its long-term growth strategy, enhancing its portfolio with another high-performing asset with strong trading metrics and foot traffic of over 1.1-million shoppers a month.

The company noted that its due diligence had been successfully completed and that the Competition Commission had unconditionally approved the transaction. 

Vukile said it was also well advanced in due diligence for another township mall acquisition.