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Vukile Property Fund resumes dividend

Because the Covid vaccination rate is so high in Spain ‘they haven’t seen resultant pressure on the healthcare system or a rise in deaths’: CEO Laurence Rapp.

FIFI PETERS: Vukile Property Fund, which owns shopping centres in South Africa, Namibia and Spain, said that five of its malls that were damaged during the July riots are now open. The company which released its interim results today, November 30, 2021, has also restored its dividend payments as activity in its malls are recovering from the Covid-19 slump.

We’ve got the CEO of Vukile Property Fund, Laurence Rapp on the line. Laurence, thanks so much for your time, sir. It’s business as usual at five of the malls hit by the riots. What about the sixth?

LAURENCE RAPP: Good evening, Fifi, and thanks for having me on the show. The sixth mall is KwaMashu. That mall had greater structural damage than the others, which is why it’s taking longer to get that one up and running. There is quite a rebuild that needs to take place there. Really what we doing is getting the anchor tenants up and running, trading with all the rebuild as we can, and we’ll gradually open the mall on a piecemeal basis until that side is fully open, and that should be done in March of next year.

FIFI PETERS: How much in sales are you losing from it not being fully open – and is it material?

LAURENCE RAPP: Well, we’re not actually losing, because remember this is covered under our Sasria insurance policy. So the loss of rent that would come through is covered by Sasria. They had already assessed the claim, have acknowledged liability, and will be paying out on that. So our experience at closure today has been exceptionally positive, and we really appreciate the speed with which they are assessing and paying the claims.

FIFI PETERS: In the main, though, the past six months have been a lot better for you. Let’s start off in South Africa where you are offering less rental relief for your tenants because they don’t need as much as they did when the pandemic first hit. Is this a signal that the worst is over from a Covid-19 perspective for Vukile?

LAURENCE RAPP: Fifi, one’s always nervous to say that, and then find a new variant that comes along – as happened in the last few days. But certainly yes, that is our feeling – that I think we are through the worst of the pandemic for various reasons.

But I think there’s an important element of knowledge and experience. When it started there was such tremendous fear and uncertainty in the market; nobody knew what to expect. All the doomsday sayers had every retailer shutting down, with go-slows and no tenants – and none of that has materialised. When you look at our results that we put through and you look at the vacancies being contained as low as they are here and in Spain, when you look at all the activity and so on, you can see that it’s a very robust business model that we have.

I think what we are seeing – not only in our two markets – as we track other markets around the world, yes, we are finding that retail does survive through a Covid wave. We understand that when you’re at the peak of a wave, footfall will drop, but the minute that wave starts to subside customers come back, the spend comes back – and I think that’s given us the confidence to say we are learning to live with Covid, we’re learning to manage with it, and we see a return to normality in terms of our business and trading. We are doing well on the cards.

FIFI PETERS: Laurence, let’s talk about Spain. I was just looking at the level of tenants that are behind on their rent in that part of the world. While it did fall by 7% to around €3 million in this period, it’s not that much of a big drop compared to the same time last year. Is the level of arrears in Spain a problem for you?

LAURENCE RAPP: No, not at all. In fact the arrears have improved. Our collection rate is somewhere around 95/96%. We are certainly collecting and we are seeing month-on-month improvements in collections. So the arrears are not a lot of concern for us at all.

FIFI PETERS: Just staying in Europe, looking at reports, which is in the thick of its fourth wave, and perhaps the Omicron variant and the forthcoming travel bans could make things worse for that part of the world. What have you seen on the ground so far in terms of how the fourth wave there is impacting on your business in Spain?

LAURENCE RAPP: I think that’s a very good question. When we look at our experience in Spain – and we’ve been learning tremendous lessons in South Africa from our Spanish experience – what you find in Spain, they’ve had a fourth wave, they’ve had a fifth wave, where they saw infection rates rising. But because the vaccination rate is so extremely high in Spain they haven’t seen resultant pressure on the healthcare system or a rise in deaths. I think that’s what we are looking for.

My understanding is that we’re going to live with Covid going forward. The questions are how the healthcare system copes with it and how the population protects itself. I was fortunate to actually get to Spain a few weeks ago to spend time with the business there and, I must say, just walking on the streets, the vast majority of people are still wearing masks, even though it’s not compulsory. There is sanitising where you dine, and I think people are being very responsible about social distancing. If you put that together with the high vaccination rate, I think you find that Spain is coping exceptionally well with these with these rises.

My understanding is that where they have seen increases, number one it’s generally [among] unvaccinated people and, number two, it’s been in the younger age group where the vaccinations haven’t yet been rolled out.

So …… our CEO in ……, what he was saying is quite interesting. It’s that with a new variant coming out, it’s actually caused lines at the vaccination centres to get very full. That is that people realise that the protection again the new variant is vaccination. They think they may well reach close to the 90% vaccination rate in the not too distant future, which I think is very, very positive. That is certainly helping that economy get back on track.

FIFI PETERS: I think that is a wonderful experience and a quite a number of lessons there that we can draw from Spain. Thanks for sharing, Laurence, but we’ll leave it there, sir.

Laurence Rapp is the CEO of Vukile Property Fund.

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Another interesting point about Spain.. they were loud and proud about the flu in 1918 and it then got named the “Spanish flu”

Familiar…

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