Dipula cuts vacancies, boosts revenues
CAPE TOWN – South African-focused real estate investment trust Dipula Income Fund lifted revenue and property income a solid 17 percent and 19 percent, respectively, in the year to August 31 due mainly to a sharp 20 percent reduction in vacancies and the consolidation of acquisitions.
Its portfolio increased to R8.9 billion from R8.6bn due to positive revaluations in a market characterised by many negative revaluations. In addition, the reduction in vacancies compares well with many other local-landlords who are dealing with rising vacancies.
“We have remained disciplined in the execution of our strategy of building a resilient portfolio. Key here is we are operationally sound. Some funds have been going the specialist route, but we always maintained that in the South African context its better to be diversified. We have different properties, in different locations, and they are not over-rented,” chief executive Izak Petersen said in a telephone interview.
Their range of strategies to de-risk the portfolio over the years included leasing, conversions, extensions and redevelopments.
“The result of these strategies is a significant improvement in our occupancy level to 94 percent,” he said. The net property cost-to-income ratio declined by 8 percent to 17 percent, he added.
The dividend per A-share increased by 4.2 percent year-on-year to 110.25 cents a share. The dividend per B-share reduced to 82.71c a share from 99.68c in 2018, resulting in a combined dividend per share of 192.96c versus 205.48c in 2018.
At year-end the group's property portfolio consisted of 194 properties valued at R8.9 billion with a total gross lettable area of 923 679 square metres, compared to 203 properties of 930 644 square valued at R8.6bn in the prior year.
Net operating profit increased 18.6 percent to R894.1 million.
Dipula spent R78m on redevelopments in the year that resulted in tenanting opportunities. More improvements were planned for 2020 and beyond.
Gearing was maintained at around 40 percent.
At year-end its blended interest rate was 9.29 percent of which 78 percent had been hedged. Exactly 187 new tenancies were secured, equating to 83 595M2 of GLA, R422m in lease value at an average escalation of 7.9 percent, and a weighted average lease expiry period of four years.
Group retail vacancies were 8.4 percent, offices 7.8 percent and industrial 2.3 percent.
The vacancy factor was significantly below SA Property Owners' Association averages, said Petersen.
Tenant retention was 85 percent with an aggregate rental increase of 1.1 percent being achieved in a market otherwise evidenced by negative rental reversions.
Petersen attributed this to Dipula’s assets not being over-rented and that rentals were in fact at levels that left room for growth.
The anticipated dividend per share on the combined basis would increase by 2 percent for the year ending August 31 next year compared to the current year.