Vukile expands Spanish portfolio with R1.93 billion Berceo shopping centre acquisition

Vukile, the third-largest South African Real Estate Investment Trust, has made the first of three acquisitions, Berceo Shopping Centre, in the city of Logroño, Spain for €101 million (R1.93 billion), a deal that is hard on the heels of the sale of its retail parks in that country.

CEO Laurence Rapp said in an online presentation Tuesday the sale of the retail parks announced last week by their 99.7%-owned Spanish subsidiary Castellana, and the two potential acquisitions, which includes another shopping centre in Spain and one in South Africa, for which talks were far advanced, were likely to be value accretive for the group, not dilutive, and was part of the group's asset rotation.

Berceo Shopping Centre was acquired from Euronext Paris-listed Barings Core Spain by Castellana at a 7% yield, would give Vukile exposure to northern Spain, the asset was dominant in its catchment area and Vukile believed the asset was relatively under-managed and that further value could be added such as with additional food and beverage, and entertainment tenants.

The other transactions were at "a very advanced stage," but Rapp said he was unable to disclose details of these at this stage. Nevertheless, additional capital would not need to be raised for the acquisitions, as the transactions would be funded with proceeds of the sale of the Castellana retail parks, with the capital raised last October and with existing cash resources.

Last month, Vukile also announced the acquisition of a 35% stake in property asset management group Pradera, for an undisclosed amount, a company that manages some €5bn of assets across 10 European countries, including the UK, Germany, Italy and Turkey.

Castellana's disposal of its portfolio of retail parks across Spain to Ares Management Corporate was for €279m cash, representing a disposal yield of 7.1%. These parks had been Vukile's inaugural investments in Spain in 2017.

Rapp said Castellana had grown its portfolio, which now approached €2bn in asset value, it had expanded its Iberian footprint, while increasing the average size and value of its assets. He said the retail parks had become less strategically important to the group as the business grew.

With the prevailing keen investor appetite for retail parks in Spain driving up asset pricing, it created an opportunity for Castellana to divest at accretive levels. He said Ares had also contracted Castellana to provide asset and property management for the retail park portfolio under a five-year agreement from the disposal date, set for April 1, 2026, a move that was part of the disposal transaction and did not signify a change in strategy to do asset management for outside parties, said Rapp.

"We see higher growth potential and better value in the Iberian shopping centre segment. At Vukile, we believe knowing which assets to sell, and when to sell them, is just as integral to effective asset management as knowing where and when to invest for better-yielding future growth," said Rapp.

New shopping centre development in Spain was constrained currently, limiting availability, supporting relative value, keeping pricing attractive and creating compelling growth opportunities for local, on-the-ground specialists such as Castellana.

Regarding the Pradera investment, Rapp said he did not expect this deal to make a substantial direct contribution to income. However, its value lay in the expertise and knowledge that Pradera could provide to Vukile, which has been investigating expansion into other European markets. Pradera manages assets in 10 European countries, including the UK, Germany and Italy.

Castellana has a strong track record of value-add investment in Spanish and Portuguese shopping centres.

In South Africa, Vukile owns several prominent retail centres, including East Rand Mall, Randburg Square, and Mall of Mthatha. It late last year announced the acquisition of Chatsworth Centre in KwaZulu-Natal from Sanlam Life. Rapp said the latest transaction was "very close" to being concluded.

He said the group had a big appetite for further investment in retail centres in South Africa, but there currently wasn't much stock on the market available to buy.

Vukile has R54bn in property assets with around two-thirds of its assets and net property income generated in Spain and Portugal. In its most recent capital re-allocation cycle, in 2024, it sold its stake in Lar Espana generating a capital profit and redeploying proceeds into the largest shopping centre in Spain's Valencia province, Bonaire Shopping Centre, which is trading strongly under Castellana's ownership.

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