BusinessDay TV (BDTV): Vukile looks to have secured control of the Synergy Income Fund and joining me now on the line is Laurence Rapp‚ CEO of Vukile.
Laurence‚ I'm sure you're quite happy because it looks as if you've gained control of the Synergy units. You've got 75% of the Synergy B linked units ... sorry‚ of the Synergy A linked units and then 55% of the Synergy voting securities‚ does this mean essentially that it's a done deal now?
Laurence Rapp (LR): It is ... but just to correct you‚ we have 75% of the B units which translates into around 55% overall so yes ... from the point of view of having issued the shares and received the Synergy shares‚ we have control of the company. The offer still is open for the remainder of this week and therefore the final percentages of the take-up will only be known on Monday or Tuesday next week‚ but it really can only go up from here and we hope that shareholders in Synergy use this opportunity to take up the offer over the remainder of this week.
BDTV: Forgive me‚ I actually had written down Synergy B linked units and I didn't trust my handwriting ... but having secured 55% of the voting securities overall at this stage‚ is that a good thing or do you actually expect a little bit more at this point having launched the offer a while ago?
LR: No‚ this was very much in line with expectations. We didn't expect the A unit holders to take up the offer. Generally the A unit holders are a different class of shareholder if you like‚ more of the income fund are holders rather than property specialists‚ so we sort of always expected a very low take-up of the A units‚ but in fact that offer of A units is really a technical consequence of the offer we extended on the B units in terms of the CRP regulations. So for us to get 75%-80% of B units is really what we were aiming for and then ultimately to get control‚ which we now have‚ so it was very much expected.
BDTV: Just remind us why you wanted Synergy? They've got regional shopping malls‚ the kind of malls that you can easily drive into‚ do a bit of shopping‚ Spar is quite a big anchor tenant for a lot of those Synergy shopping centres‚ what is the attraction?
LR: Sure‚ you know Vukile is a larger‚ more-diversified fund but nonetheless in an overweight position in retail assets.... So what this does for us is give us access to a further 15 shopping centres. A couple of the larger ones‚ which we are particularly excited about Gugulethu Square‚ King Senzangakhona Centre‚ Setsing Crescent‚ Atlantis‚ adds very well to the Vukile model and these are centres that ultimately in time could be very easily integrated into the Vukile model and managed by our very experienced team who really are on the ground with lower-income shopping centres‚ servicing very similar customers. So you can see it's a very synergistic deal and really sort of deepened our position in our preferred asset class‚ being lower-income‚ lower LSM (living standards measure) retail-based centres.
BDTV: Yes‚ so would you say retail is still where it's at ... certainly it's been very interesting to see the performance of the listed retail shares on the JSE this year‚ it seems to indicate a lot of confidence in the sector still. What's your feeling at this point?
LR: Absolutely ... look we think that retail is still the preferred asset class to be in and one's got to base a view on looking at the performance of the various subsectors through the cycle not just at a point in time. So you may find that there's some talk of the consumer being under pressure‚ consumer spending a little bit lower‚ which may be the case‚ but remember property is a long-term game. You're not looking at the next 12 months‚ we're looking through the cycle‚ and when you look at the demographic make-up of SA‚ the consumerism‚ the consumption-driven economy that we have‚ we think that retail really is the preferred asset class and hence our desire to keep deepening our exposure to retail.
BDTV: And as for the performance of the listed property shares such as yours‚ last year was another fantastic year‚ do you think there might be a little bit of a tail-off this year and would it actually be reasonable to expect a little bit of a breather?
LR: When one looks at property‚ you've got to look at the long-term performance. While last year was a fantastic year for a return of around 27%‚ for me what's more impressive is looking at the fact that over a 10-‚ seven-‚ five-‚ three-‚ one-year period‚ property has been a top-performing asset class and therefore needs to be an important part of anybody's portfolio. Investors shouldn't accustom themselves to looking for annual growth of 25% etc.‚ but if you can bank a good‚ call it 12%-15% per annum over the long term‚ that makes it a fantastic asset class to have. So yes we think that listed property‚ and I'm increasingly seeing (it) as a key part of that and (it) has a long way to go to still offer value to investors. I wouldn't be so bold as to say it's another year of 20% plus performance but I think buy property for the right reasons‚ and that is the stability low-risk nature of the income ... and over periods of time you'll find you get to outperformance relative to inflation and other asset classes of equities and bonds.
BDTV: Yes‚ well you certainly have over the last decade whether it's going to be the same for the next 10 years we'll wait and see.
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