FIFI PETERS: Vukile Property Fund, which owns shopping centers in South Africa, Namibia and Spain, said five of its shopping centers that were damaged during the July riots are now open. The company that released its interim results today, November 30, 2021, has also reset its dividend payments as activity in its shopping centers is recovering from the Covid-19 crash.
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We have Vukile Property Fund CEO Laurence Rapp on the line. Laurence, thank you very much for your time, sir. Everything continues as usual in five of the shopping centers affected by the riots. And the sixth?
LAURENCE RAPP: Good evening, Fifi, and thank you for inviting me on the show. The sixth mall is KwaMashu. That mall suffered more structural damage than the others, so it takes longer to get up and running. There is a great rebuilding that must take place there. What we’re really doing is getting the anchor tenants up and running, negotiating with as much reconstruction as we can, and little by little we’ll open the mall little by little until that side is fully open, and that should be done next March. year.
FIFI PETERS: How much are you losing in sales by not being fully open? Is it material?
LAURENCE RAPP: Well we’re not really losing, because remember this is covered by our Sasria insurance policy. So Sasria covers the loss of rent that would occur. They had already evaluated the claim, they have acknowledged responsibility and they will pay for it. So our experience at today’s closing has been exceptionally positive and we really appreciate how quickly you are assessing and paying claims.
FIFI PETERS: Overall though, the last six months have been much better for you. Let’s start in South Africa, where you are offering less rent relief for your tenants because they don’t need as much as they did when the pandemic first hit. Is this a sign that the worst has passed from a Covid-19 perspective for Vukile?
LAURENCE RAPP: Fifi, you are always nervous to say that, and then you find a new variant that appears, as it happened in the last few days. But certainly yes, that is our feeling, that I think we are going through the worst of the pandemic for several reasons.
But I think there is an important element of knowledge and experience. When it started, there was tremendous fear and uncertainty in the market; no one knew what to expect. Everyone who said the end of the world had all the retailers shut down, with delays and no tenants, and none of that has materialized. When you look at the results that we present and see that vacancies are contained as low as here and in Spain, when you look at all the activity, etc., you can see that it is a very robust business model that we have.
I think what we are seeing, not just in our two markets, as we track other markets around the world, yes, we are discovering that retail is surviving through a Covid wave. We understand that when you’re on top of a wave, the footsteps will drop, but the moment that wave starts to wane, customers return, spending returns, and I think that has given us the confidence to say that we are learning to to live. With Covid, we are learning to deal with it and we see a return to normalcy in terms of our business and commerce. 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 rent in that part of the world. While it fell 7% to around € 3 million in this period, it is not a huge drop compared to the same period last year. Is the level of delinquency in Spain a problem for you?
LAURENCE RAPP: Not at all. In fact, arrears have improved. Our collection rate is around 95/96%. We are certainly collecting and we are seeing month-over-month improvements in the collections. Therefore, arrears do not worry us too much.
FIFI PETERS: Just staying in Europe, looking at the reports, which is in the middle of its fourth wave, and perhaps the Omicron variant and upcoming 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 is impacting your business in Spain?
LAURENCE RAPP: I think it’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 experience in Spanish, what you find in Spain, they’ve had a fourth wave, they’ve had a fifth wave, where they saw infection rates rise. But because the vaccination rate is so high in Spain, there has been no pressure on the health system or an increase in deaths. I think that is what we are looking for.
I understand that we are going to live with Covid in the future. The questions are how the health system manages and how the population is protected. I was lucky enough to arrive in Spain a few weeks ago to spend time with business there and, I must say, just walking the streets, the vast majority of people still wear masks, although it is not mandatory. There is disinfection where you dine, and I think people are being very responsible with social distancing. If you couple that with the high vaccination rate, I think you will find that Spain is dealing exceptionally well with these increases.
My understanding is that where they have seen increases, number one is generally [among] unvaccinated people and, number two, has been in the youngest age group where vaccines have not yet been implemented.
So …… our CEO in ……, what he was saying is quite interesting. It is that with the appearance of a new variant, it has actually caused the lines in the vaccination centers to get very full. That is, people realize that the protection again the new variant is vaccination. They think that close to 90% of the vaccination rate may well reach in the not too distant future, which I think is very, very positive. That is certainly helping the economy get back on track.
FIFI PETERS: I think it is a wonderful experience and a lot of lessons 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.