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VKE
VKE
VKE - Vukile Property Fund Limited - Company Announcement
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE Share code: VKE ISIN: ZAE000056370
NSX Share code: VKN
("Vukile")
18 March 2010
Dear Vukile stakeholder
Tough but improving conditions
We are approaching the end of our financial year and I am happy to report that
there are indications that trading conditions have improved somewhat since our
last newsletter.
As forecast at the interim stage, vacancies have increased but are still within
acceptable limits. Bad debts have also been contained within budget and,
although we are seeing a slight slowdown in rental collections, this is still
within our prediction framework.
The retail portfolio performed above expectations. This is borne out by the fact
that we saw an increase in turnover for most of our centres for December 2009
compared to December 2008.
Another pleasing aspect so far this year is that, in spite of the challenging
market conditions, we were able to negotiate renewal rentals on expiries at
rates that were, on average higher than the expiry rentals and, in some
instances, substantially higher.
Our recurring cost to gross income ratio has, in line with the experience of the
industry as a whole, increased and will probably continue to do so as a result
of the increases in energy costs and rates and taxes.
Taking into account all of the above, we are still of the opinion that the
increase in distributions for the year ending 31 March 2010 will be reasonable
and could even be slightly higher than originally anticipated.
Completing negotiations
On 18 December 2009, the linked unitholders of the company approved the
transaction in terms of which Vukile would acquire the property asset management
business relating to the Sanlam property portfolio from Sanlam Properties, as
well as obtain an option to acquire a R500 million property portfolio from
Sanlam and a right of first refusal on the remainder of the Sanlam property
portfolio. The transaction came into effect on 1 January 2010. As a result of
this, we will render property asset management services to Sanlam Life in
respect of its entire property portfolio. This is in addition to the property
asset management of our own portfolio which was internalised on 1 October 2009.
As part of the implementation of the acquisition agreement, we have merged the
old Vukile staff with the new Vukile staff on the first floor of the Meersig
Building which was previously the Sanlam Properties premises. In line with this
development, Ina Lopion has joined the Vukile board as the executive director
for asset management. She previously held this position with Sanlam Properties
and brings with her almost 20 years of experience in property matters.
It is pleasing to note that, as a result of the previous close relationship
between Vukile and Sanlam Properties, the merger process has been very smooth.
In the meantime, we are hopeful that we can shortly finalise the previously
announced transaction in terms of which Vukile proposed to acquire 13 properties
from Sanlam at a cost of R780 million. The competitions authority has already
approved the transaction. If everything goes according to plan, we hope to issue
the circular containing the details of the transaction and convening the linked
unitholders` meeting by no later than the end of May 2010.
Progress on current capital projects
The extension to and renovation of the Oshikango Shopping Centre have been
proceeding according to programme and budget. The project was approved in
November and consists of:
- New lease premises for Spar (1 963m2)
- A new Pep Stores (1 194m2)
- A new line shop (260m2)
- Total capital outlay of N$27.7 million
- Expected yield of 10.5% in first year after completion
- Repairs and maintenance to existing buildings at a cost of N$3 million
With Spar as a major food anchor, the longer term viability of the centre, will
be ensured.
Construction was originally hampered by the high rainfall levels experienced in
northern Namibia in January and February this year, but the anticipated
completion date of 30 September 2010 should be achieved.
The development of the new Edgars premises (1 500m2) at the Oshakati Shopping
Centre was triggered by the high turnovers achieved by the Edgars Group`s
JetMart Store in the recently completed fashion mall.
The total capital outlay for this project is estimated at N$13.4 million and the
investment is expected to yield a net 10.4% in the first year after completion.
The building work at this project was also delayed by the heavy rains but we are
confident that the intended completion date of 31 August 2010 is still
achievable.
Looking forward
Traditionally, the property market follows the broader economy by 12 to 18
months. We therefore do not expect a substantial or sustained improvement in
trading conditions before at least the second half of this year.
As indicated previously however, there are indications that economic activity is
picking up. In this regard, it is significant to note that the Minister of
Finance has predicted a positive growth in GDP for the 2010 calendar year of
between 0.5% and 1.0%. We are therefore cautiously optimistic that we have
probably "turned the corner" and that business conditions should slowly start to
improve.
Year end results announcement
Vukile`s results for the year ending March 2010 will be published on 24 May.
There will be a presentation on the results in Johannesburg on 24 May, in Cape
Town on 25 May and in Windhoek on 31 May. If you would like to attend any of
these presentations, please contact our investor relations office at
vukile@dpapr.com for an invitation.
Similarly our annual report for the 2009/2010 financial year will be published
by the end of June and will be available for downloading from our website
(www.vukileprops.co.za). If you would like a hard copy, please provide your
mailing address to our investor relations office at vukile@dpapr.com.
Yours sincerely
Gerhard van Zyl
Chief executive
JSE sponsor to Vukile
Barnard Jacobs Mellet Corporate Finance (Proprietary) Limited
NSX sponsor to Vukile
IJG Securities (Proprietary) Limited
Date: 18/03/2010 13:24:01 Produced by the JSE SENS Department.
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