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Rebuilding after the destruction and looting of Vukile-owned malls

‘What’s happened now has not discouraged us at all. We’ve always been appropriately insured against it, and we’ve built strong relationships with the communities that we’re in’: Vukile CEO Laurence Rapp.

FIFI PETERS: Some shopping centres that were hit by the looting have started reopening their stores – those that were not destroyed in flames.

Here to update us on the reopening of its malls, as well as the rebuilding after the destruction from the looting, is Laurence Rapp, who is the CEO of Vukile Properties. Laurence, thanks so much for your time. Phew, how quickly things can change! The last time I spoke with you, you were speaking about improved results on the bottom line, and now we are talking about a situation that can potentially reduce the profits that may be forthcoming in the foreseeable future. How badly were the affected malls damaged by the riots?

LAURENCE RAPP: Fifi, I think it’s very important to put things in context and not to create panic on the financials. Vukile’s business is diversified across two countries. Half of our earnings come from Spain and half from South Africa. Within South Africa, we’ve got 45 shopping malls, six of which have been damaged. So it’s important not to create the impression that this is going to damage the earnings in any way materially. In fact it may not damage them at all because of the insurance that we have in place.

We do have the six malls that have been damaged through Gauteng, and four in KwaZulu-Natal or KZN, and we are pleased to say that the rest of the portfolio has not been affected. As of tomorrow all these malls, other than those six, will be trading as normal.

FIFI PETERS: That’s good. So the recovery seems quite fast then?

LAURENCE RAPP: Well, the six malls that have being damaged will need to be repaired. At the moment we were able to get engineers and contractors on site today to start assessing the damage. Only once that’s done can we start putting plans in place to reinstate the malls.

Of the six malls it looks as though four should be fairly swift to get up and running again. Most of the damage has been to shopfronts and roller-shutter doors, and that should be quite quick to fix. The other two have sustained elements of structural damage. We don’t have a full picture yet, and only once we do will we know how long it’ll take to reinstate those malls. But again, the loss of income is fully insured, as is the structural and the physical damage to the assets.

FIFI PETERS: I see that you say that you’re fully insured by the maximum amount that is covered by Sasria. Are you in a position to tell us exactly how much we’re talking about here? And also, a number of companies that are insured by Sasria are saying that they’re expecting a whole lot of delays, given the volumes of claims that Sasria is currently being hit with right now. Is this your concern?

LAURENCE RAPP: Look, we are comfortable because the family has the maximum amount of cover, which is R1.5 billion, and that should more than adequately cover the extent of the damage. We haven’t quantified it yet, but just gut feel from what we seeing [indicates] that should cover it.

Our experience of Sasria in the past has been very positive in terms of the speed they’ve paid out claims. Obviously that’s been in a different scenario, with an isolated incident around a mall that might’ve been damaged through social unrest, through lack of service delivery. Here we are talking about multiple claimants in multiple provinces. So there may well be some delays, I guess. From a Vukile point of view, we have the cashflow, we have the facilities to continue with all of that work that needs to be done to reinstate the malls while we wait for that payout. But I must say that the initial engagement with the insurers has been exceptionally positive, very, very professional. We hope that they continue in that vein because their initial engagement has been as I said, very, very good.

FIFI PETERS: I think your shareholders are hoping that that continues as well. But Laurence, it must’ve come as a relief to you that your ratings agency didn’t downgrade you following these riots, or deem you a higher risk client. What does this situation mean for the rental income you are expecting from some of your tenants – a lot of the small businesses in some of your malls who may not have Sasria cover?

LAURENCE RAPP: Here I think it’s very important to quantify what we are talking about. We are talking about six malls out of 45 in South Africa, which make up approximately half of the income in the group, because the rest comes from Spain. Within those six malls, probably about 80 to 85% of the rent is going to come from national tenants, and we would fully expect them to have their own insurance in place; and once they are up and trading to pay their rent, I can see no reason why that wouldn’t happen.

On the SME side that you’re referring to, that is really where I think we are concerned. I think there will be certain traders who are going to struggle; maybe they weren’t insured. And I think that is where Vukile is going to adopt a very compassionate approach in working with our tenants that are our partners in the business, and try and find ways to help them get back on their feet as quickly as possible.

We have many tenants who’ve been with us for many, many years. I think what we want to do is really be there as a property partner, not a landlord – which often carries such negative connotations. We are a partner and it’s about helping them to get back on their feet, and making sure that they can get back to their own livelihoods, employing people and servicing the customers in the communities. So at this stage we can’t really quantify what that amount is. We have started, as of this morning, engaging with our SME tenants. Today I met with all the four tenants, saying, “Let’s get back to trading as quickly as possible”. There are no views of saying, “We’ve had enough, we are not opening up again, we want to shut down”. These are traders who want to open, they need to open. And I think we’re going to work very productively and cooperatively with them in order to try and get those centres up and trading as soon as you possibly can.

FIFI PETERS: Laurence, (it’s often said) all landlords are bad or have a negative connotation. I happen to have a very nice landlord, and it sounds like you’re a nice landlord, given the potential relief for some of your tenants that you’re talking about here. But you was talking about the fact that for a few of them, in fact most of them, you’re not entirely negative about their position in this country, or even doing business in this country.

How committed are you? What stops you from looking at more opportunities in Spain, where you have quite a significant presence as opposed to putting more money in South Africa’s economy, given what has just happened?

LAURENCE RAPP: I don’t think that it’s a question of investing in Spain because we’ve lost confidence in South Africa. To the contrary. We’ve built a very successful business in Spain, and the way that we look at that is that we really have internal debates around the best allocation of capital. It’s about where we find the opportunities that we believe are going to add most value to the group.

If we were presented with opportunities to invest further in South Africa today, we would do so. We believe that the township and rural strategy that we’ve been following is a very good strategy. What’s happened now has not discouraged us at all. We’ve always been appropriately insured against it and we’ve built strong relationships with the communities that we’re in.

So we would look at deals, both in South Africa and in Spain, and certainly it’s a very positive, very strong message. We are not negative on South Africa, we’re not exiting. It’s a question of where we find shopping centres that meet our needs, that we believe we can add value to, and that are part of our core strategy.

FIFI PETERS: All right, Lawrence. I think it’s quite important that you are committed to South Africa, provided that the right opportunities present themselves for investment. Thanks so much for your time. Lawrence Rapp is the CEO of Vukile Property Fund.




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Great Interview, would love to hear an interview with Fairvest’s CEO, given 100% of their portfolio is in S.A. and over 10% of that (Bara Precinct & Richmond Shopping Centre) was damaged & looted…

End of comments.





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