Property Flash


The JSE-listed residential specialist landlord Indluplace Properties looks like a new company, having worked its way through the Covid-19 pandemic in 2020 and 2021.

In an interview with Property Flash about financial results for the year to end-September, CEO Carel de Wit and FD Terry Kaplan said the group’s portfolio was performing strongly with healthy metrics. The real estate investment trust (Reit) declared a dividend of 31.95c per share, 13.6% higher than the full dividend in the previous financial year, after paying out 85% of distributable earnings. Reits are mandated to pay at least 75% of their distributable income as dividends each financial year.

The group reported a loan-to-value (LTV) of 38.45%. Property Funds tend to aim to have their LTVs at lower than 40% as fund managers who invest in these funds have often said any LTV above 40% to suggest the company may have entered financial distress.

“We are very happy with how Indluplace has come through in the past three years. Since the pandemic broke out in 2020, we have had to work especially hard to be able to provide affordable homes to our tenants. South Africans and other people living in our country have struggled with declining affordability. But our tenants have mostly stayed with us, renting at fair levels,” said de Wit.

Indluplace Properties listed on the JSE in 2015 and owns and manages a portfolio of 9 249 residential units with about 15 549m² of associated retail space and 480 student accommodation units. Its 125
buildings are mainly situated in Gauteng with some exposure to Mpumalanga and the Free State.

De Wit said he was pleased with strong rental collections and improving occupancy across its portfolio. Occupancy were 91.5% at year-end, a good improvement from the beginning of the year’s 87%. He said Indluplace achieved most of its strategic objectives for the year, with a focus to ensure
that its newly internalised property management team operated efficiently to improve portfolio
performance, at similar costs to its previously outsourced model.

“Our team has concluded more than 34% more new leases in this year than 2019, the last pre-Covid year. Unfortunately higher than normal tenant turnover meant that the recovery was slower than we had hoped,” he said.

Letting in the company’s Vanderbijlpark student buildings was disappointing after the
universities transitioned away from head leases.

“The environment in Vanderbijlpark has been very uncertain, but we have introduced various management improvements and are confident of a much improved 2023”, said de Wit.

A headlease is a primary lease that is signed between a tenant and a property manager. The tenant, or head lessee, is contractually responsible for the terms of the lease, and in most lease agreements, they have the ability to sublease the space if they so wish. The idea is that all student units would be included under one lease.

As part of its strategic re-organisation of its portfolio, Indluplace continued with its disposal
program and transferred 13 non-core properties worth R62.6m in the reporting financial year;
which also included 24 sectional title units that were sold individually. Three properties
have been sold for R41m with transfers expected in 2023 and further individual sectional
title sales worth about R36m are also expected.

Secured financial liabilities reduced from R1.39bn to R1.36bn as part of the proceeds
from disposals were used to pay off term facilities. Indluplace renewed facilities worth
R604m, one with a current lender and the second by bringing on a new lender to diversify
its exposure.

Contractual revenue fell to R465m from R490m in the previous year, as average
residential vacancies over the twelve months decreased from 12.8% to 8.5%, because of specific
drive from its internal letting team, offset by the disposal of non-core properties.

De Wit said Indluplace had the potential to grow to be a much larger investment vehicle over the next few years. It was largely held by Fairvest, a listed property fund. There was not a lot of trade in its shares but De Wit was optimistic that steps would be taken over time to increase the fund’s liquidity and enhance its market capitalisation.

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