Vukile Property Fund Limited - Group 1 Notes Ratings Affirmed, post the sale and acquisition of pr
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Vukile Property Fund Limited
– Group 1 Notes Ratings
Affirmed, post the sale and
acquisition of pr
Johannesburg, 31 January 2017 — Global Credit Ratings (‘GCR’)
has affirmed the final, public long term credit rating of
‘AA+(ZA)’ with a Stable outlook to the following Group 1 Notes
issued by the Issuer, Vukile Property Fund Limited (‘Vukile’):
R240m Senior Secured Notes, stock code VKE03, maturity 8
May 2017;
R380m Senior Secured Notes, stock code VKE06, maturity 8
May 2018; and
R200m Senior Secured Notes, stock code VKE07, maturity 8
June 2020.
RATING RATIONALE
GCR has been advised that Vukile has concluded discussions
with Synergy Income Fund Limited (‘Synergy’) and Arrowhead
Properties Limited. The transaction was approved by the
Competition Commission in December 2016. The transaction
entails Vukile acquiring the bulk of Synergy’s retail assets
in return for the sale by Vukile to Synergy of the majority of
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017Vukile’s office and industrial assets. This has materially
changed the Group 1 Property Portfolio that serves as security
for the abovementioned Group 1 Notes. GCR has been advised
that Vukile has sold and acquired the following properties:
Properties
Sold
(‘Sold’)
Legal Building /
GLA Market Value
Description Property Name
Erven 10430,
Cape Town
10431,
Bellville
1. 10432, 10479 22,311 m2 R351,600,000 ‡ KF
Louis
and 25285
Leipoldt
Bellville
Properties
Sold to
Synergy
(‘Sold’)
Legal Building /
GLA Market Value
Description Property Name
Durban Valley
Erven 1227 View
1. 30,790 m
2
R119,500,000 * KF
New Germany Industrial
Park
Erven 210 Germiston
2. Meadowdale 35,016 m
2
R173,400,000 * KF Meadowdale
Ext 1 R24
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017Erven 294, Randburg
295 and 441 Trevallyn
3. 32,006 m2 R142,200,000 * QP
Kya Sand Ext Industrial
27 Park
Sandton
Erven 6 Bryanston St
4. 10,184 m2 R84,000,000 * KF
Epsom Downs Andrews
Complex
Sandton Hyde
Erven 431
5. 4,110 m2 R53,900,000 * KF Park 50 Sixth
Hyde Park
Road
Erven 1225
Sandton
and 1226
6. 8,140 m2 R87,000,000 * QP Sunninghill
Sunninghill
Place
Ext 98
Portions 2 Sandton
and 5 of Rivonia 36
7. 2,410 m
2
R30,850,000 ‡ QP
Erven 246 Homestead
Edenburg Road
Sandton
Portion 13 Bryanston
8. of Erven 13 4,585 m2 R57,500,000 ‡ KF Grosvenor
Bryanston Shopping
Centre
Pretoria High
Erven 3261
9. 12,093 m2 R138,000,000 ‡ KF Court
Pretoria
Chambers
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017East London
Erven 42903
10. 9,040 m
2
R78,900,000 ‡ KF Vincent
East London
Office Park
Cape Town
Erven 18005,
Parow
11. 18006 & 19,834 m2 R71,300,000 ‡ KF
Industrial
23181 Parow
Park
Totals: 168,208 m2 R1,036,550,000
Properties
Acquired by
Vukile
(‘Acquired’)
at March
2016 Market
Value
Legal Building /
GLA Market Value Type
Description Property Name
Elim Hubyeni
Erven 3
1. 11,874 m2 R127,500,000 † QP Shopping Retail
Elim-Hubyeni
Centre
Erven 1522 Highland Mews
2. Del Judor 17,032 m2 R224,000,000 † KF Shopping Retail
Ext 16 Centre
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017Erven 4483,
4486 and Gugulethu
3. 24,955 m2 R415,000,000 † QP Retail
4489 Square
Gugulethu
Nzhelele
Erven 3013 Valley
4. 5,308 m2 R55,900,000 † KF Retail
Makhado-A Shopping
Centre
Erven 493 King
5. and 114 22,325 m
2
R262,300,000 † KF Senzangakhona Retail
Unundi BA+ Centre
Totals: 81,494 m2 R1,084,700,000
30 September
‡
2015
31 March
*
2016
+ 5 April 2016
† 31 July 2016
KF Knight Frank
Quadrant
QP
Properties
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017Acquired
Properties
Lease Expiry
Profile by
GLA
Legal Dec Dec Dec > Dec
Mothballed Vacancy Dec ’18
Description ’17 ’19 ’20 ’20
Erven 3
1. 0.0% 0.9% 64.5% 8.7% 12.6% 4.7% 8.6%
Elim-Hubyeni
Erven 1522
2. Del Judor 1.3% 9.0% 32.9% 15.5% 0.0% 19.7% 21.5%
Ext 16
Erven 4483,
4486 and
3. 0.6% 0.0% 16.1% 5.1% 70.9% 7.3% 0.0%
4489
Gugulethu
Erven 3013
4. 0.0% 1.4% 46.9% 8.3% 0.8% 9.5% 33.1%
Makhado-A
Erven 493
5. and 114 0.0% 3.5% 13.8% 44.5% 12.7% 4.5% 21.1%
Unundi BA
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017Post
Transaction
Closing
Lease Expiry
Profile by
GLA
Dec Dec > Dec
Mothballed Vacancy Dec ’17 Dec ’19
’18 ’20 ’20
Group 1
Property 1.6% 4.2% 32.8% 20.9% 15.0% 7.4% 18.1%
Portfolio
Vukile has acquired a 100% share in each of the abovementioned
retail properties. Vukile reported the Group 1 Property
Portfolio Loan to Value as 24.3%, after the sale and
acquisition of the abovementioned properties, based on the
most recent Open Market Valuations.
The Cape Town Bellville Louis Leipoldt property is expected to
be transferred in February 2017. Furthermore, Vukile bought
the remaining 50% of the Pinetown Pine Crest property, which
is expected to be transferred in February 2017.
GCR analysed the Group 1 Property Portfolio with the following
assumptions:
1. The properties sold have been transferred;
2. The properties acquired have been transferred;
3. Vukile’s remaining 50% shareholding in the Pinetown Pine
Crest property has been maintained.
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017Elim Hubyeni Shopping Centre (Limpopo) is situated in a rural
high density area that services a low LSM demographic, and has
75% national retailers/tenants. There is, however, some
competition from the adjacent Elim Mall (opened in March
2013), where the same tenants account for c. 17.9% (GLA). GCR
assumed that those tenants that signed leases pre-2013, will
not renew. The lease expiry profile of Elim Hubyeni Shopping
Centre is: 13.3% that expire before March 2017, with the
remaining 2.5% at March 2018 and 2.1% after March 2018.
Highland Mews Shopping Centre (Mpumalanga) is situated in a
medium to high density area that services a low to medium LSM
demographic, and has 80% national retailers/tenants. Gugulethu
Square (Western Cape) is situated in a medium density area
that services a low to medium LSM demographic, and has 90%
national retailers/tenants. Nzhelele Valley Shopping Centre
(Limpopo) is situated in a rural medium density area, and
services a low LSM demographic that has 88% national
retailers/tenants. King Senzangakhona Centre (Kwa-Zulu Natal)
is situated in a rural medium density area, and services a low
to medium LSM demographic, with approximately 84% of its GLA
let to national retailers/tenants.
The Group 1 Property Portfolio of the Transaction has evolved
into a predominant retail portfolio, comprising a mix of
retail (90.8% Market Value, 80.9% of GLA), office/commercial
(1.0% Market Value, 0.5% of GLA), and industrial properties
(8.7% Market Value, 18.1% of GLA).
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017The mixed use properties consist of the Randburg Office Tower
(10,453 m 2 ), which has been converted to a residential
apartment block, (Randburg Square Apartments). Randburg Square
Apartments reported a 9.4% vacancy at December 2016.
Management subsequently informed GCR of full occupancy at end
January 2017. The apartment block is only scheduled to be
externally valued in March 2017, and therefore GCR did not
factor in the value for the apartment block, or the related
cash flows.
The Group 1 Property Portfolio reported R20.3m in arrears at
December 2016. Total exposure to Edcon Holdings Ltd, measured
in GLA, has increased to 13,552 m 2 (4.68% post-transaction
closing). Total exposure to SA Post Office, measured in GLA,
decreased marginally to 1,363 m 2 (0.47% post-transaction
closing).
Vukile’s properties are valued every six months on a
rotational basis by independent external valuers (Broll, Jones
Lang LaSalle, Knight Frank and Quadrant Properties).
The rating of the Secured Notes is derived by applying a
notching approach, starting from the long term senior
unsecured corporate credit rating of the Issuer. The Issuer is
currently rated ‘A(ZA)’ and ‘A1(ZA)’ on the long and short term
scales respectively, with the long term rating being on Stable
outlook. Based on GCR’s Global Structurally Enhanced Corporate
Bonds Rating Criteria, the calculated overall recovery rate of
Printed on: Dec 23, 2021 / Location:
https://gcrratings.com/announcements/vukile-property-fund-limited-group-1-notes-ratings-affirmed-post-the-sale-a/
/ Date of article: Feb 1, 2017100% carries the qualification “Excellent Recovery Prospects”.
A four notch rating uplift on the national scale is deemed to
be appropriate for the Transaction. Accordingly, GCR has
accorded and affirmed a final, public Long Term rating of
‘AA+(ZA)’ to the Group 1 Notes, with a Stable outlook.
RATINGS HISTORY
Stock code Initial Rating Long Term Rating Short Term Rating Outlook
VKE03 10 May 2012 AA(ZA) n.a Stable
VKE06 12 May 2015 AA+(ZA) n.a Stable
VKE07 12 May 2015 AA+(ZA) n.a Stable
Stock code Last Rating Long Term Rating Short Term Rating Outlook
VKE03 9 May 2016 AA+(ZA) n.a Stable
VKE06 9 May 2016 AA+(ZA) n.a Stable
VKE07 9 May 2016 AA+(ZA) n.a Stable
ANALYTICAL CONTACTS
Corné Els
Senior Structured Finance Analyst
+27 11 784 1771
CorneE@globalratings.net
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017Committee Chairperson
Emma-Jane Fulcher
Head: Structured Finance Ratings
+27 11 784 1771
fulcher@globalratings.net
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Summary Structurally Enhanced Corporate Bonds Rating
Criteria – revised Sep ’16;
Vukile Property Fund Ltd Senior Secured Surveillance Report –
May ’16 and subsequent ratings announcement;
Global Criteria for Rating Corporate Entities – Feb ’16;
Global Summary Criteria for Rating Property Funds – May ’16;
and
Vukile Property Fund Ltd Rating Report – Feb ’16.
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS
AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS
BY FOLLOWING THIS LINK:
http://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION,
GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017DOWNLOAD AT THE FOLLOWING LINK:
http://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITION
S. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF
INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT
POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT
http://GLOBALRATINGS.NET.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S
STRUCTURED FINANCE GLOSSARY
General term for non-performing obligations, i.e.
Arrears
obligations that are overdue.
A long term debt instrument issued by either: a company,
Bond
institution or the government to raise funds.
A financial term for monetary changes in operations,
Cash Flow
investing and financing activities.
Corporate
A credit rating accorded to a corporate entity.
Credit Rating
A contractual agreement in which a borrower receives
something of value now, and agrees to repay the lender at
Credit some date in the future, generally with interest. The term
also refers to the borrowing capacity of an individual or
company
An opinion regarding the creditworthiness of an entity, a
security or financial instrument, or an issuer of securities
Credit Rating
or financial instruments, using an established and defined
ranking system of rating categories.
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/ Date of article: Feb 1, 2017Exposure is the amount of risk the holder of an asset or
security is faced with as a consequence of holding the
security or asset. For a company, its exposure may relate to
Exposure
a particular product class or customer grouping. Exposure
may also arise from an overreliance on one source of
funding.
International local currency (International LC) ratings
measure the likelihood of repayment in the currency of the
International jurisdiction in which the issuer is domiciled. Therefore,
Scale Rating LC the rating does not take into account the possibility that
it will not be able to convert local currency into foreign
currency or make transfers between sovereign jurisdictions.
The party indebted or the person making repayments for its
Issuer
borrowings.
Agreement or temporary use and enjoyment of a corporeal
thing (movable or immovable property) the whole or part
thereof for rent. The essential elements of a contract of
lease are: 1.) Undertaking of lessor to give the lessee the
Lease
use and enjoyment of something; 2.) Agreement between the
lessor and lessee that the lessee’s right to use and
enjoyment is temporary; and 3.) Lessee’s undertaking to pay
a sum or rent.
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/ Date of article: Feb 1, 2017A sum of money borrowed by a debtor that is expected to be
paid back with interest to the creditor. A debt instrument
where immovable property is the collateral for the loan. A
mortgage gives the lender a right to take possession of the
Loan property if the borrower fails to repay the loan.
Registration is a prerequisite for the existence of any
mortgage loan. A mortgage can be registered over either a
corporeal or incorporeal property, even if it does not
belong to the mortgagee. Also called a Mortgage bond.
A long term rating reflects an issuer’s ability to meet its
financial obligations over the following three to five year
period, including interest payments and debt redemptions.
Long-Term
This encompasses an evaluation of the organisation’s current
Rating
financial position, as well as how the position may change
in the future with regard to meeting longer term financial
obligations.
An assessment of the property value, with the value being
Market
compared to similar properties in the area.
Notching A movement in ratings.
Property Movable or immovable asset.
The action or process of regaining possession or control of
Recovery
something lost. To recoup losses.
A security that has a higher repayment priority than junior
Senior
securities.
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017A short term rating is an opinion of an issuer’s ability to
Short-Term
meet all financial obligations over the upcoming 12 month
Rating
period, including interest payments and debt redemptions.
A transaction that enables an Issuer to issue debt
securities in the capital markets. A debt issuance programme
Transaction that allows an Issuer the continued and flexible issuance of
several types of securities in accordance with the programme
terms and conditions.
An assessment of the property value, with the value being
Valuation
compared to similar properties in the area.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by
any other business activities of the credit rating agency; b.)
the rating was based solely on the merits of the rated entity,
security or financial instrument being rated; c.) such rating
was an independent evaluation of the risks and merits of the
rated entity, security or financial instrument; and d.) the
validity of the rating is for a maximum of 12 months, or
earlier as indicated by the applicable credit rating document.
The Arranger and the Issuer participated in the rating process
via face-to-face meetings, teleconferences and other written
correspondence. Furthermore, the quality of info received was
considered adequate and has been independently verified where
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017possible.
The rating/s above were solicited by the Arranger of the
Transaction; GCR has been compensated for the provision of the
ratings.
The credit rating/s has been disclosed to the Arranger and the
Issuer with no contestation of the rating.
The information received from the Arranger / Issuer:
Rent Rolls for the Group 1 Property Portfolio;
Property register;
Budgets 2017 Financial Year;
Arrears for the Group 1 Property Portfolio.
Vukile Property Fund Limited – Group 1 Notes Ratings Affirmed,
post the sale and acquisition of properties.
Printed on: Dec 23, 2021 / Location:
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/ Date of article: Feb 1, 2017You can also read
