May 19 2025 17:42
SOUTH AFRICA
Last week, Dipula Properties, formerly known as Dipula Income Fund, announced its intention to exit the residential sector. The group said so during the release of financial results for the six months to end-February 2025. This is as the company which just turned 20 looks to invest more its capital in retail centres for communities. But it’s worth questioning if Dipula will look to acquire retail centres in line with its largest shareholder, Fairvest. Fairvest has historically focused on buying retail centres.
Fairvest increased its stake from 5% to 26.3% on November 18, 2024. Perhaps Fairvest and Dipula should consider a merger but should that happen the two groups would need to accommodate both executive teams. Dipula was founded by its CEO Izak Petersen with the help of Marc Wainer and Redefine Properties. Petersen also co-founded Mergence. Farivest is led by CEO Darren Wilder. Wilder has turned Fairvest around having led the group for more than a decade. Fairvest has a market capitalisation worth around R9.7bn across its A and B shares while Dipula’s shares are worth about R5bn. Many market players want more liquidity in listed property. Fairvest buying Dipula would create more liquidity. The egos would need to coexist or someone would have to move on.
Petersen said in a media presentation last week that the groups were not in merger talks and that Fairvest was a key shareholder. Dipula reported an increase in its property portfolio’s value of 5% to R10.3bn, supporting a 6% rise in its net asset value (NAV). The Reit’s distributable earnings per share (DPS) increased 4.2% for the half year, on track with full year guidance of between 4% and 6%. This is pleasing as its in line with prevailing consumer price inflation rates.
“Dipula’s operational performance reflects solid delivery and a strongly defensive position in persistently challenging conditions. However, we have felt the impact of higher prevailing interest rates and hedging costs relative to expiring hedge instruments. Encouragingly, we are seeing signs of recovery in the office sector and continued stability in our retail and industrial portfolios, with sustainability initiatives expected to support long-term performance,” said Petersen.
Dipula’s portfolio includes 161 retail, office, industrial and residential property across South Africa, predominantly in Gauteng with its retail assets in townships, rural, and urban convenience locations contributing 67% of portfolio income.
Dipula’s revenue for the six months was similar to the prior period at R760m. Its net property income rose 3%, constrained by property related expenses, which grew 6%, mainly driven by municipal tariff increases. Its total cost-to-income ratio rose marginally to 43.5% from 42.6% a year ago, driven by improved recoveries and its solar energy roll-out. Its administrative cost-to-income ratio remained unchanged at 4%.
Chilli Lane Shopping Centre
The Reit’s operational highlights for the period included its leasing activity which contributed to a reduction in its overall portfolio vacancies from 8% to 7%. It additionally achieved a weighted average positive renewal rental rate across its portfolio, underpinned by positive rates, it said.
Dipula’s office portfolio recorded a renewal rate of 8.3% with a lower vacancy rate of 19%, down from 23% in the prior interim period; its industrial portfolio a 6.2% renewal rate with a vacancy rate of 4%, and its retail portfolio a 2.4% renewal rate with a vacancy rate of 6%. New and renewed leases concluded during the period amounted to R309m with its tenant retention of 79% lower than in recent periods.
“The Reit intends to sell its affordable and conveniently located residential rental units, with a 9% vacancy rate), which currently represent 4% of income, to re-allocate capital to its retail and industrial portfolios which are core to its business,” it said.
Dobson Point Shopping Centre
Dipula invested R117m in refurbishments and redevelopments with close on R70m of this allocated to defensive projects. A portion of the proceeds from R125m in disposals achieved a 4% premium to book value, contributing to funding these projects together. No acquisitions were completed during the period.
“We are firmly committed to future-proofing our portfolio. We are assessing some interesting opportunities which fall within our core focus, a few of which we hope to close in the short-term,” said Petersen.
Meadow Point Shopping Centre
“We are looking at logistics parks and retail properties which serve communities,” he said.
alistair@propertyflash.co.za