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Vukile Property Fund is taking its first steps into Italy after another year of strong growth, using the success of its Iberian retail strategy to drive further European expansion.The retail real estate investment trust (Reit) reported that it has entered the Italian market with an inaugural €115m (R2.17bn) portfolio, acquired at an initial yield of 10%, comprising three shopping centres in Turin, Padua and Naples, marking the establishment of a new platform for further expansion in the country.This expansion comes on the back of annual results showing 9.3% growth in both funds from operations and dividends per share, with the like-for-like South African portfolio also valued 12.3% higher.The group also reported like-for-like net operating income growth of 10.3% in South Africa and 7.9% in Iberia, reflecting strong performance across both its South African and Iberian retail portfolios. Total assets stood at R63.7bn following post-year-end acquisitions, with close to 70% now located in Europe.“Vukile is replicating our proven Castellana playbook to build Esperia in Italy, where we see the potential to acquire a portfolio in excess of €500m over time,” said Laurence Rapp, CEO of Vukile. We see a clear opportunity to build a specialist platform for institutional, permanent capital and unlock income growth through active management, strong tenant partnerships and a lower cost of capital— Laurence Rapp, Vukile CEO“Two further acquisitions of a combined €200m are already lined up at an expected cash-on-cash yield of 9%."He added that the group’s operational strength, active asset management and disciplined capital allocation had underpinned results ahead of guidance.Vukile also completed an oversubscribed R2.8bn capital raise in May, providing additional funding for growth opportunities across its core markets. The group ended the year with R7.6bn in available liquidity, while its loan-to-value ratio improved to 38.4%.This move forms part of a broader European growth strategy, supported by continued capital recycling and acquisitions during the year, including a 35% stake in pan-European retail fund manager Pradera.Vukile said Italy offers attractive retail property fundamentals, supported by strong consumer spending, high household wealth and low debt levels, alongside favourable sector dynamics, including low e-commerce penetration of around 10%, limited new supply and sustained tenant sales growth since 2019.Vukile's performance and outlook (Nolo Moima) “Building off our experience and track record in Spain and Portugal, we see a clear opportunity to build a specialist platform for institutional, permanent capital and unlock income growth through active management, strong tenant partnerships and a lower cost of capital,” said Rapp.He added that the Italian expansion is being supported by Pradera’s local expertise and track record in the market, which helps to de-risk entry into a new market while providing access to deal flow and operational insight across Europe.The group has also established its Italian platform, Esperia Properties, following post-year-end acquisitions. Rapp said Esperia will be owned directly by Vukile rather than Castellana, its 99.7% subsidiary listed in Madrid, which manages its Iberian portfolio across Spain and Portugal.He said this was for tax-efficiency reasons, improving capital flows back to South Africa while reducing tax leakage while also reducing operational complexity, with Esperia drawing on Pradera’s management expertise in Italy.Acquisitions in Madrid, Barcelona and La Rioja further reinforced Castellana’s presence in Spain’s key retail marketsRapp added that the group is building a leading European retail knowledge base across Pradera and Castellana, reflecting that Vukile is already deeply embedded in European retail markets and is not entering the region from scratch.Through Castellana, Vukile continued to strengthen its position in Iberia, executing €902m of transactions and recycling capital from nine Spanish retail parks into higher-growth shopping centres.Retail sales across the portfolio increased 4.5%, footfall rose 3.6%, vacancies remained low at 1.1% and rental reversions reached 9.1%, while acquisitions in Madrid, Barcelona and La Rioja further reinforced Castellana’s presence in Spain’s key retail markets.In South Africa, Vukile continued to reshape its portfolio through targeted acquisitions and disposals, selling R630m of noncore assets while increasing its exposure to dominant retail centres.During the year it acquired a 50% stake in Chatsworth Mall in KwaZulu-Natal for R620m and is set to take transfer of Botshabelo Mall in the Free State for R433m in July.The group also continued investing in renewable energy and value-add projects, including upgrades at East Rand Mall and Nonesi Mall.
