From local to international: Vukile's impressive 2025 earnings leap
Vukile Property Fund has emerged from a transformative year with more than 60% of its income now derived offshore, a result of bold expansion into Portugal and strategic capital rotation in Spain — moves that have cemented its presence in two of Europe’s most resilient consumer economies.
Source: Supplied. Laurence Rapp, chief executive officer of Vukile Property Fund.
Backed by operational excellence and a clear capital strategy, the group delivered strong financials for the year ended 31 March 2025.
Laurence Rapp, chief executive officer of Vukile Property Fund, said he was pleased with the results in what he described as "a transformative year, distinguished by accretive strategic growth and capital rotation".
"This outstanding performance validates Vukile’s strategy, expands its earnings base and positions the business for compounding future growth,” he said.
Delivering on its market guidance, Vukile achieved 3% growth in full-year funds from operations (FFO) per share and increased its dividend per share (DPS) by 6%. This mainly due to its superior dealmaking, ongoing operational excellence, and decisive and disciplined capital deployment.
Furthermore, it announced upgraded FY26 guidance, forecasting growth of at least 8% in both FFO per share and DPS.
It’s total property assets now exceed R50bn, reflecting an ambitious yet tightly focused investment strategy.
Iberian expansion accelerates
During the year, Vukile grasped a golden window of opportunity that expanded its Iberian direct asset base by nearly 60%, consolidating its footprint across two of Europe’s most resilient consumer economies. Now, 65% of the group’s assets, and an expected 60% of its net property income is derived offshore.
Vukile entered Portugal during the year through its 99.6% held Spanish subsidiary Castellana Properties. The fully-funded multi-asset entry capitalises on Portugal’s strong economic growth and fragmented retail property sector that is ripe for consolidation, mirroring opportunities seized in Spain.
Continuing its creative dealmaking, in Spain Vukile exited its investment in Lar España with a capital profit of €82m, concurrently redeploying the proceeds into acquiring the Bonaire Shopping Centre in Valencia with a cash-on-cash return exceeding 8% thereby enhancing sustainable earnings.
Retail portfolio resilience
Vukile closed the year with an investment portfolio of 33 urban, commuter, township and rural malls in South Africa,15 shopping centres and retail parks in Spain and five shopping centres in Portugal.
“In South Africa, Vukile’s robust operating platform yet again delivered outstanding results,” notes Rapp.
Valued at R16.7bn, Vukile’s defensive, dominant South African retail portfolio delivered strong performance and growth. The value of its retail portfolio rose by 8.5%, while like-for-like net operating income increased by 6.4%.
Vacancies remain exceptionally low at 1.7%, supported by active letting, with positive rental reversions of 2.4%. Notably, 85% of leases were signed at the same or higher rental levels, with tenant retention at 91%.
Growth, efficiency, sustainability
The total portfolio recorded trading density growth of 5.2% - with its township and rural portfolio outperforming at 6.7% - driven by Vukile’s shopper-first approach, which continues to boost footfall and sales. The portfolio’s cost-to-income ratio was 15.3% - its lowest level in a decade – reflecting proactive cost management, with the benefit of solar energy contributing to significant efficiency gains.
Vukile’s solar PV rollout in South Africa has been highly successful, boosting margins and advancing its path to carbon neutrality. Over the year, solar capacity grew by 67%, with 14.4MWp added to the existing 21.6MWp. Solar power now supplies 27% of the portfolio’s energy needs. Vukile has identified a further 10.6MWp of solar projects for FY26 and is finalising the agreements for two wheeling projects totalling 2MWp.
Adding value to its South African portfolio through acquisitions and developments, Vukile’s R113m redevelopment of Mall of Mthatha (formerly BT Ngebs), in which Vukile acquired a 50% stake in May 2024, has delivered strong early performance, with the vacancy rate dropping from 16% when acquired to just 2%.
The highly accretive project is set for completion in September 2025. The comprehensive R141m Bedworth Centre strategic upgrade in Vanderbijlpark, delivered a high-convenience, community-focused retail destination with enhanced tenant mix, aesthetics, amenities, access and security.
Vukile’s well-established investment in Spain, together with its new investment in Portugal has clearly cemented Castellana's position as a market leader, capitalising on the advantages of the region’s status as a European growth powerhouse.
The Economist ranked Spain as Europe’s top-performing economy in 2024, with GDP growth of 3.2% and forecasts of 2.3% in 2025. The country’s economic growth is fuelled by strong household spending. Disposable income rose by 8.7%, supported by higher salaries, employment and savings levels. Additionally, tourism hit a record €126bn with 94 million visitors.
Portugal’s economy outperformed expectations with 1.9% growth in 2024, driven mainly by household consumption, with record-high employment levels, real wages increasing and high disposable income. Private consumption rose 3.2% in 2024. Growth is forecast at 2.3% in 2025. Like Spain, Portugal is benefiting from easing inflation, projected to fall to 2.3% in 2025.
Castellana’s R32.9bn, 20-asset Iberian portfolio remains effectively fully let, with marginal vacancies of around 1% and 95% of space let to blue-chip international and national tenants. Portfolio like-for-like net operating income grew 6.4%.
It achieved high positive rental reversions and new lettings of 17.31%. The portfolio has a weighted average lease expiry of 8.8 years. Excellent trading metrics featured across the portfolio, with footfall up 2.4% and sales increasing by 4.3%.
“Castellana’s on-the-ground presence and expertise has added substantial value to the Iberian portfolio. This year has been one of rapid growth in the region, and our priority is to crystalise potential in our newly acquired assets and deepen value within our existing footprint.” says Rapp.
Strength, stability, strategy
Vukile’s balance sheet remains exceptionally strong, with a stable LTV of 40.95% and an increased ICR of 2.9-times. The REIT enters FY26 with a well-hedged balance sheet and minimal debt maturities of less than 2% of group debt in FY26, as well as a very healthy liquidity position, with cash and undrawn facilities of R4.6bn.
Vukile has an AA(ZA) corporate rating reaffirmed by GCR with a positive outlook. Fitch has awarded Castellana an international investment-grade credit rating of BBB- also with a positive outlook. Over the year, Vukile increased its green and sustainability-link debt by 69% from R1.3bn to R2.2bn, aligning its funding strategy with its continued commitment to ESG goals.
Rapp concludes, “Vukile is in a strong position, underpinned by a clear strategy, a proven operating platform, a strong balance sheet, high-quality assets and disciplined capital management.
"It is well placed to deliver sustainable real growth by maintaining operational excellence, advancing value-added projects within existing portfolios and pursuing further opportunities in our core markets. We are committed to our proven scalable consumer-led model to create value for all our stakeholders.”