Portfolio growth Archives - Page 3 of 3

Vukile’s South African and Iberian retail property portfolios delivered impressive increases in performance in November and December 2024, signalling a successful Black Friday and holiday trading period.

SOUTH AFRICAN PORTFOLIO

The robust trade of our assets and the vibrant demand from both shoppers and retailers for our shopping centres, particularly in the township and rural markets, remains encouraging. These impressive trading figures bode well for income and valuation growth.

Turnover

Highlighting a positive trend in festive trading, the South African Portfolio achieved a strong 6.1% growth in trading density during the combined November and December 2024 period, compared to the same months in 2023. This continues the portfolio’s positive annualised trading density momentum, which was 2.4% in March 2024 and 4.2% in September 2024. To date, FY25 has continued to show improved and sustained growth as anticipated, driven by an improved macroeconomic environment, governmental reforms on electricity and pension funds, and continued positive sentiment following the formation of the government of national unity.

During the two-month period, Township shopping centres were the best performing portfolio segment with trading density growth of 9.6%. Rural and urban centres delivered trading density growth of 5.9% and 4.6%, respectively, further highlighting the strong festive shopping demand within the communities we serve.

Retail categories with the most significant turnover growth were Unisex Wear (+7.7%), Groceries (+7.2%), Fast Food (+6.3%) and Home Furnishing (+6.0%), which all recorded substantial, sustained growth. These increases demonstrate strategically sound category exposure particularly in the non-discretionary segments of the market.

Footfall

Shopper visits in November 2024 increased by 5% compared to November 2023, reflecting stronger Black Friday trade over the month. December 2024 footfall remained consistent with the same period last year.

IBERIAN PORTFOLIO (Castellana Properties)

The trading activity within the portfolio during November and December 2024 underscores the robust growth outlook for Spain and Portugal, primarily fuelled by private consumption. The projections for 2025 remain pleasingly positive, buoyed by strong employment figures, healthy savings, and manageable inflation. These factors are likely to continue driving interest rate cuts, thereby enhancing consumer spending power.

Spain

Turnover

Sales rose by 4.9% in November 2024 compared to November 2023, with all retail segments experiencing growth. Notably, the Leisure sector jumped by 21.1%, Food & Beverage climbed by 12.2%, and Health & Beauty saw a 7.3% rise.

December sales rose by 4.8%, with Homeware leading at 9.4%, followed by Leisure at 7.8%, and Sports & Adventure at 5.6%.

Footfall

In Spain, shopper visits surged by 9.7% in November 2024 compared to the previous November, with a remarkable 17.0% increase during Black Friday Week. On Black Friday itself, Castellana’s Spanish shopping centres saw a 10.8% uptick in visits.

December 2024 footfall in the Spanish portfolio grew by 2.4% year-on-year, while the Christmas period (from 1 December 2024 to 6 January 2025) saw a 2.9% increase.

Portugal

Turnover

November sales climbed by 8.5% year-on-year, with all categories showing improvement. Household & Furniture led with a 17.5% increase, Accessories rose by 12.9%, Electronics grew by 11%, and Fashion went up by 7.4%.

December sales increased by 2.8%. Leisure was the top performer with a 26.9% rise, followed by Household & Furniture at 15.1%, Accessories at 5.8%, and Fashion at 5.0%.

Footfall

In Portugal, footfall increased by 4.6% in November 2024 compared to the previous year and surged by 15.9% over Black Friday Week, with a noteworthy 21.2% rise on Black Friday. In December 2024, footfall in the Portuguese portfolio rose by 2.1% compared to December 2023.

TRANSACTIONS UPDATE:

EXCLUSIVE DISCUSSIONS TO ACQUIRE BONAIRE SHOPPING CENTRE

Castellana remains in exclusive discussions to acquire the largest shopping centre in Spain’s Valencia province, Bonaire Shopping Centre, from multinational retail REIT Unibail-Rodamco-Westfield. The transaction’s closing was extended due to the tragic 2024 floods in Spain. Unibail-Rodamco-Westfield is making good progress towards reinstating and reopening the centre, which is expected mid-February 2025.

DISPOSAL OF STAKE IN LAR ESPAÑA

On 27 December 2024, Castellana closed the sale of its 28.8% stake in Lar España, receiving proceeds of c. €200m after negotiating an improved cash offer of €8.30 per share, delivering a total profit of c. €108 million through a combination of dividends received (c. €38 million) and capital appreciation (c. €70 million) and an IRR of c. 45% per annum since January 2022 in ZAR terms.

Through the Lar España exit, Castellana has created an opportunity to recycle capital into other strategically aligned and financially accretive growth opportunities with attractive yields and with significantly lower operational and deal execution risk.

ALEGRO SINTRA ACQUISITION – 50/50 JV AGREEMENT WITH NHOOD/CEETRUS

Continuing its expansion into Portugal, on 19 December 2024 Castellana acquired 50% of Alegro Sintra shopping centre in Lisbon from Ceetrus, represented by their subsidiary Nhood, the real estate arm of ELO Group. This leading French retail conglomerate owns Auchan, Leroy Merlin, Decathlon, and Kiabi, among other brands. The 50% stake was priced at €46.5m. The asset is valued at €180m, representing a first-year net initial yield of 8.00%.

Alegro Sintra is a dominant, highly successful shopping centre located in the north of Lisbon, a dense and growing residential node, with an annual footfall of 8.7 million visits and a total gross lettable area (GLA) of 58,000m², including a top-performing Pingo Doce supermarket. The centre is well anchored by a complete fashion offering, including Inditex brands and Primark and a strong food court.

Castellana acquired 50% of the company that owns 42,255m² of the shopping centre’s GLA, with the Pingo Doce supermarket being owner-occupied and excluded from the transaction. The shopping centre offers strong and growing income with opportunities to add value through strategic asset management initiatives together with our joint venture partners.

Through this joint venture Castellana is partnering with an institutional real estate business in Europe with strong synergies, both in terms of on-the-ground know-how and presence in Portugal, as well as access to further opportunities across Iberia and the rest of Europe.

STOR-AGE GROWS ITS PORTFOLIO TO 107 PROPERTIES AND CONTINUES TO DELIVER

JSE REIT Stor-Age, South Africa’s leading and largest self storage property fund, maintained its resilient financial performance for the six months to September 2024, delivering growth in its distributable income per share of 3.5%. On the back of another excellent operational performance at the property level, Stor-Age continued its track record of consistent earnings growth. The Company continued executing its strategic growth strategy, adding a further 10 properties to the portfolio over the past 12 months, taking the total number of properties to 107.

Stor-Age CEO Gavin Lucas commented, “Stor-Age has once again delivered an impressive financial and operational performance over the past six months. We continued to expand our portfolio, opening eight properties during the period and increasing the combined value of the portfolio, including properties managed in our JV partnerships, to R17.4 billion. In the nine year period since listing on the JSE in November 2015, we have grown our portfolio by 83 properties and outperformed the SA Property Yield Index, or SAPY, by 150%.”

The South African portfolio continued to outperform, with rental income and net property operating income increasing by 10.8% and 12.0% respectively compared to the prior year. Average occupancy and rental rates increased by 2.4% and 8.2% respectively, with occupancy in the same-store portfolio of owned properties growing by 8 900m² year-on-year.

After a challenging FY24 in the UK, Stor-Age delivered an equally pleasing set of results for the period. Rental income increased by 6.8%, with average occupancy and rental rates up 4.3% and 2.4% year-on-year respectively. Occupancy in the owned portfolio increased by 3 300m² year-on-year and net property operating income was up 7.4% compared to the prior year.

Stor-Age has a long and successful track record of acquiring, developing and managing self storage properties in prime locations which have delivered high occupancy and rental rate growth. Over the past 12 months, the Company has opened 10 new properties across both markets. This included five new developments completed in JV partnerships (two in SA and three in the UK), four properties added to the third-party management platform in the UK and the acquisition of Extra Attic in South Africa in September 2024.

Comments Lucas, “We continue to work with our JV partners to assess future acquisition, development and redevelopment opportunities. These partnerships are a key focus for the Group as we seek to source additional capital and development opportunities to deliver mutually beneficial outcomes for both Stor-Age and our partners. We remain confident that the long-term return profile on invested capital through our JV partnerships will be value-accretive as new developments lease up to mature occupancy levels.”

The Company has remained focused on its third-party management offering. A total of 26 properties are operating on this platform, 18 of which are in the UK. During the period, Stor-Age entered into a third-party management agreement with Hines to manage their acquisition of a self storage portfolio of three properties in the UK. Hines is a privately owned global real estate investment manager who own and operate US$93 billion of assets across property types and on behalf of a diverse group of institutional and private wealth clients. Stor-Age continues to work closely with Hines as they seek to deploy capital and build scale in the self storage market.

The Company’s loan-to-value ratio was 31.3% at period end, with 81.2% of net debt subject to interest rate hedging. In April 2024, Stor-Age raised R500 million in a debt auction allowing the Group to increase funding capacity, extend maturities and diversify funding sources. Noted Lucas, “While Stor-Age continues to benefit from a conservatively managed and interest rate hedged balance sheet, we do need to acknowledge the negative impact of the higher interest rate environment. While we have seen the first rate cut in South Africa and we saw a second rate cut last week in the UK, the cost of debt funding remains high. At an EBITDA level, we delivered attractive year-on-year growth of 7.9%, or R32.2 million, however net finance costs were up 21.8%, meaning that the R22.1 million increase in net finance costs effectively diminished our distributable income performance.”

Stor-Age has also continued its focus on environmental sustainability, further expanding its solar PV roll-out strategy across the South African and UK portfolios. To date, the Company has invested R72 million into renewable energy, generating over 7.7 million kWh of solar power. Currently, 60% of the portfolio has solar capacity installed.

Concluded Lucas, “We are well positioned from a strategic, financial and operational perspective as we approach the second half of FY25. We expect our South African portfolio to continue its positive growth trajectory for the remainder of the financial year, and we remain cautiously optimistic that our UK portfolio will deliver a robust set of results for the full financial year. Although competitive move-in pricing dynamics remain prevalent in the UK market, we are satisfied with our operating performance to date and remain confident in our ability to navigate the challenges that lie ahead.”

Stor-Age reaffirmed its FY25 full year forecast of distributable income per share to be between 122 to 126 cents.

The share closed on Friday at R14.95.

Key highlights for the period:

Earnings and total returns: Distributable income per share up 3.5% to 63.51 cents, with an interim dividend declared of 57.16 cents per share (90% payout ratio) and a total return of 10.91%¹
Financial performance: Same-store net property operating income up 9.6%, occupancy up 12 200m² and net investment property value up 5.4% to R11.5 billion
Portfolio growth: Added 10 properties, with the portfolio including the pipeline and ongoing developments now exceeding 680 000m². The growth includes five new developments, four third-party managed properties in the UK and the acquisition of Extra Attic in SA in September 2024
Strategic partnerships: Entered third-party management agreement with Hines in May 2024. Total of 26 properties now under third-party management
Balance sheet management: Successful debt auction raised R500 million below price guidance in April 2024, with a loan-to-value ratio of 31.3% and 81.2% of net debt subject to interest rate hedging
Environmental sustainability: Expanded solar PV roll-out, investing an additional R8.5 million during the period, with 60% of the portfolio now fitted with solar
Future outlook: Remain confident in business model’s resilience, reaffirming FY25 full-year forecast of distributable income per share of 122 to 126 cents

¹ 12-month dividend per share plus the increase in SA REIT net asset value (NAV) per share (for the 12-month period) as a percentage of SA REIT NAV at the start of the 12-month period