South Africa-based Vukile Property Fund, which has become one of the largest retail landlords in Spain and Portugal, rallied to a five-year high just shy of R19 last week.
The stock is up about 13% since early April, making it one of the JSE’s best-performing property counters year to date.
Vukile’s run has no doubt been strengthened by management clinching yet another deal in Portugal this month — Forum Madeira, a 21,472m² open-air shopping centre in Funchal, the capital of the Portuguese island of Madeira.
The centre, which is 100% let, was bought for €63.3m at a yield of 9.5%. Forum Madeira is Vukile’s fifth shopping centre acquisition in Portugal since it entered the country in September last year through its 99.5%-held Spanish subsidiary, Castellana Properties, listed in Madrid.
The other four are all sizeable malls that dominate their respective catchment areas in and around Lisbon and Porto.
The Madeira deal comes after last month’s acquisition of the 78,000m² Bonaire Shopping Centre, the biggest shopping and leisure destination in the Spanish east coast city of Valencia.
Vukile bought the centre for €305m at a yield of 7% from European retail giant Unibail-Rodamco-Westfield.
The acquisition, Vukile’s biggest Iberian deal by value yet, is funded with the €200m proceeds from the sale of Castellana’s stake in Spain-listed Lar España late last year. Vukile made a handsome profit of €82m on the capital recycling deal.
After what Vukile CEO Laurence Rapp describes as a “transformational’’ year, Vukile’s total exposure to the Iberian Peninsula now comes to 21 malls worth close to R35bn.
This equates to about 68% of Vukile’s R51.2bn shopping centre portfolio (see graph). The balance is made up of 33 South African shopping centres, mainly catering to lower-income shoppers in townships, rural areas and CBDs.
It is a retail property subsector that has proven to be one of the most resilient through South Africa's up and down cycles.
Rapp says Vukile’s recent entry into Portugal was a strategic move to capitalise on the country’s strong economic and tourism growth and a fragmented retail property sector, which offers cash-flush investors attractive buying opportunities.
He adds: “We have now cemented Castellana’s position as a leading retail property player in the European economic powerhouses of Spain and Portugal.”
From small beginnings when he entered Spain for the first time in 2017, Rapp, a former investment banker who has built a formidable reputation as a dealmaker, has made impressive strides in expanding and repositioning Vukile’s Iberian portfolio — both in terms of the quality and size of its assets.
Vukile was the first listed South African player to enter Spain. Its initial Spanish investment comprised stakes in 11 retail parks across Spain worth €300m — mostly smaller, strip-type centres typically anchored by electronics or grocery retailers.
At the time, Eastern Europe and the UK were the preferred offshore destinations for most local property players.
Lighthouse Properties is the only other JSE-listed counter that offers investors exposure to the Iberian retail property market. However, it is a 100% rand hedge stock and generates all its earnings in euros (in Spain, Portugal and France).
Though there may be a case to be made for Vukile to eventually split its Iberian and South African portfolios into separate listings, analysts find it appealing that the company effectively offers the best of both worlds.
“At this stage, retaining a dual-market strategy remains compelling, as it gives investors exposure to both the South African recovery and growing hard currency earnings from Spain and Portugal,’’ says Metope Group investment analyst Curwin Rittles.
He adds that Vukile has demonstrated its ability to acquire assets in Spain and Portugal at attractive yields with meaningful asset management upside, underpinned by a strong local operating platform.
Stanlib analyst and portfolio manager Ahmed Motara has a similar view. He says that while Spain and Portugal are relatively new offshore geographic additions to the JSE’s listed property sector, they are two of the fastest-growing countries in Western Europe.
“Both exhibit relatively strong population growth and labour market dynamics, growing consumer confidence and a high level of discretionary consumer spending.’’
Referring to the strong rebound in the region’s tourism sector, Motara notes that Spain’s tourist numbers topped a record 90-million in 2024.
We have now cemented Castellana’s position as a leading retail property player in the European economic powerhouses of Spain and Portugal
— Laurence Rapp
In addition, both Spain and Portugal are still relatively undersupplied in terms of shopping centre space per capita, which provides a solid underpin for retail property returns.
“There are clearly still shopping centres that fail even in the face of such strong macro dynamics, and buying an ‘overrented’ asset is always a risk. However, the asset selection and risk mitigation process followed by Vukile is robust and disciplined, leading to acquisitions that should perform in line [with] or above management expectations.”
Evan Robins, portfolio manager at Old Mutual Investment Group, agrees that Vukile has been successful in its offshore capital allocation strategy, “both in scaling up its Iberian portfolio to the extent that it is now a major player in the region, and selecting a retail property geography that has been performing particularly well”.
He adds that the company has also managed to extract value through high-return asset management initiatives in some of its Iberian assets.
The question is whether Vukile is still a good buy at current levels of about R18.90, which place the share up 30% over 12 months and nearly 300% ahead of its 2020 pandemic-induced lows.
Rittles notes that the stock trades at an 11% discount to its last reported NAV. That compares to a market average closer to 25%, “suggesting the market is assigning a relative premium to Vukile’s quality and execution track record”.
The counter offers a distribution yield of about 8.4%, which Robins says places Vukile on the expensive side relative to its South African peers. But he adds that one can’t expect it to be cheap given its singular focus on retail, the quality of its assets and growing exposure to Spain and Portugal.
Motara believes Vukile remains a long-term hold, with potential for further share price upside. This will ultimately depend on the extent to which management is able to deliver on earnings growth and offshore diversification expectations, he says.
Vukile is expected to deliver inflation-beating dividend per share growth of 6% when its annual results for the year to March are released early next month.
Management has already provided dividend growth guidance of at least another 6% for the 2026 financial year, an unusual move which will likely further buoy investor sentiment.
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