Property Flash


May 14 2024 11:34

Diversified property group Dipula Income Fund saw its distributable earnings per share fall 5% from 28.719 cents for the six months to end-February 2023 to 27.307 cents for the same period to end February 2024.

Headline earnings per share rose to 29.12c from 27.93c. Group revenue rose to R755m from R691.5m in the comparable 2023 period, thanks to a combination of an increase in rental income, higher municipal recoveries and straight-line rental income accruals that increased substantially on the back of long-dated leases concluded during the period.

Property related expenses increased 15% to R274m, primarily because of increases in municipal tariffs.

“Despite the sluggish economic conditions and exorbitant municipal cost increases, Dipula managed to drive efficiencies in other operating costs and, as a result, the group’s net property income was 6% ahead of the prior period at R474m,” the group said.

CEO Izak Petersen said continued stability in the retail, industrial and residential sectors would help the group in the long run as would an improving office sector. He said Dipula’s assets had mostly recovered from the effects of the pandemic in 2020 and 2021.

Dipula’s portfolio includes retail, office, industrial and residential property assets spread throughout SA, with the majority of the portfolio located in Gauteng. Its stated strategy is to own a defensive portfolio with a bias towards convenience, rural and township retail centres. 

Dipula’s portfolio rose to R9.8bn from R9.7bn a year ago, as a result of higher valuations at the end of August 2023. The portfolio consisted of 166 properties, down from 179 a year ago, with a total gross lettable area of 879,007m².

The group invested about R59m in refurbishments and redevelopments during the period and planned to invest a further R180m in capital expenditure in the short- to medium-term, it said. This would be funded from existing cash resources, new debt and capital recycled from disposals. Dipula sold five properties with a book value of R40m, for a total consideration of R36m during the reporting period.

Dipula made no acquisitions in the six month reporting period. Its net asset value rose 2%, despite a a dividend reinvestment plan (DRIP) having been in place last year, which increased the number of shares. A DRIP automatically uses the proceeds generated from dividend stocks to purchase more shares of the company. This strategy allows investors to compound their returns over time by accumulating more shares, which themselves pay dividends that will be reinvested.

Dipula reported a loan-to-value (LTV) of 37%, with debt of R3.7bn and assets worth R9.8bn. This is a healthy number as analysts like LTVs to be below 40%. A property group with an LTV above 40% may be under financial distress. Dipula has a debt expiry profile of 4.2 years and its net asset value (NAV) sat at R6bn. A tenant retention ratio of 90% was achieved.

Petersen said Dipula regularly looked at potential deals including possible takeovers of other funds. However, he was happy at the state of the fund’s current portfolio and had not been pressed to invest abroad either.

“I’m happy with where we are. I feel we are coping in a tough environment where rates are kept higher for longer, for example. We have strong assets. A standout is that our residential properties can attain rentals of around R4000 per square metre. Our retail turnover was also strong, having risen 14%. We are waiting for the right time to do new deals be it acquisitions or disposals,” he said.

Dipula’s board said that distributable earnings per share for the second half would be in line with the reporting period.

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