Landscape-altering buildings and renovations give the impression that the economy is on the boil, acknowledges Vukile CEO Laurence Rapp in an early interview as he considers that the very opposite is true.
The industry works in cycles, adds Rapp 45, in a grey suit and up since 4.30am. That’s in keeping with a daily routine that allows him to spend an hour on e-mails and news updates. The next hour-and-a-half is devoted to studying the Torah at a nearby Shul. As that diary entry suggests, religion “is at the centre” of this politically-minded CEO’s life. The day at the office ends around 5.30pm – to devote time to family: his wife, Emma, a speech therapist, and their three children – but Rapp works late most evenings.
The dial in his car radio is locked on 94.7 but religious music features prominently in his collection. He got “hooked” to Homeland, a series on DStv, in December. Rapp played cricket as a youngster but now he enjoys watching it, usually at the Wanderers. Notwithstanding his “property genes”, he regards family time highly. In addition to political books, the Vukile boss, who swears by transparency and describes his management style as laid back and inclusive with a touch of dormant autocracy, imbibes in business literature.
About the economy, a victim of global storms, he says much has changed since many property schemes were put in place around 2010 (hence the unlikely cranes). For starters, an invoice in interest rates to the tune of 250 basis points in a few months, makes debt-financing dearer. The REIT – whose asset base is R16 billion and has an extensive footprint – isn’t fretting because when it foresaw a rise in cost of capital as an issue, it pre-funded its new development projects.
Amid Vukile’s rapid transformation and trebling asset base, from R5 billion when Rapp arrived in 2011, the share price has moved in line with the sector over the same period.
It has crept 12% since 2011 (and retreated months ago). Market cap is R9.5 billion, a sixth of industry leader Growthpoint’s. The schism between Vukile’s prospects, aided by organic and acquisitive growth, and share price suggests the market is missing this deal-maker’s Midas touch that enabled the firm to venture abroad (via a 21% stake in the UK’s Atlantic Leaf).
It has also broken new ground following the takeover of rural and township mall owner Synergy Income Fund, now under Sedise Moseneke, after an extended courtship. Expect more milestones.
“I am very much success-driven... never satisfied with my achievements.” He has delivered on the key areas he was tasked with, but acknowledges that Vukile, the first property firm to enjoy the REIT status, was, a victim of perceptions stemming from when its portfolio was seen as questionable, mostly because of the location of its properties. “Poor-quality CBD properties have all been sold,” notes the straight-talking Rapp. “If you look at metrics like value per square metre, it’s gone up by 70% or 80% over that period. Average value per property has more than doubled.”
The 105 property-strong portfolio (including Synergy’s assets), in which retail is overweight, accounting for 70% with offices, industrial and other categories claiming the rest – is mainly in Gauteng, where its shopping centre footprint stretches from Soshanguve to Soweto, and others. The 40900m² Randburg Square is also in the mix. The other seven provinces (barring the Northern Cape) are home to 43% of Vukile’s asset base. Excepting Namibia, which claims 5% of the portfolio, Vukile isn’t spreading out owing to un-ideal yields in most parts of the continent.
Without harping on South Africa’s economic travails, or attendant slump stalking the property industry, Rapp, chairman of the SA REIT Association, switches to a “positive silver lining” at the end of the cycle.
The end of the down cycle on development will fan demand for existing space, he observes. The reality that tight demand lifts prices, time frames aside, doesn’t elude Rapp. Such attitude, identifying opportunities even in the throes of a storm, defines him. Having helped recalibrate the REIT, improve its sectoral and geographic mix, this tough taskmaster is hailed by colleagues for being “the driving force behind Vukile’s transformation and growth”.
Building and business make up his DNA. It’s no joke that Rapp has “property genes on both sides”. His mother’s uncles were builders. Dave Rapp, of Rapp & Meister Real Estate, was his paternal great uncle. For his part, Rapp has always followed property (even studied it as part of his BCom at Wits, where he earned an honours Cum Laude in 1993) before amassing a wealth of experience in the world of finance. So, he was sold when Vukile, recruited him in 2010 while a director at Standard Bank.
Rewinding to early days, Rapp recalls his first job at 13, as a salesman at a family friend-owned sports shop. “I loved that – selling!” Johannesburg childhood memories are coloured by, among others, old folks talking business. He thus visualised his older self “leading an organisation”. Here he is. “I saw myself as a dealmaker.” Prepubescent peers might have probably viewed him as “delusional” but he forged ahead.
“I (remember) sitting on my grandfather’s lap listening to the stock exchange reports,” Rapp says. The sport shop job triggered him to buy sportswear and sell it to his teachers. His entrepreneurial spirit did not end there. At Wits, it turned out that one of his new friends (now also a business leader), was an innate entrepreneur too, so they got down to business selling ladies’ clothes and, later, printing T-shirts for varsity societies and liberation movement organisations.
The pair minted it. By 21 they had bought cars, were able to pay their own fees, and had travelled locally and overseas. Having an accountant dad had its perks. “My father didn’t bring business to the table… but he didn’t hide his business life from his home life. They melded together.”
As a father and a “dealmaker”, Rapp’s domestic-work life is melded too. Towards the end of our hour-long interview, he speaks of his dream to build an enlarged and prominent Vukile.
“I would love to build a global property company. I see no reason why we can’t play in international markets being based in South Africa, so we are growing our international exposure – initially through Atlantic Leaf. We’re looking at other opportunities,” he lets on, before touching on the importance of having happy employees and shareholders, able to enjoy long-term value. “I would like Vukile to be a highly regarded company known as being best of breed.”
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