Dipula Income Fund investing heavily in renewable energy

Dipula’s Dobsonpoint shopping centre

Dipula’s Dobsonpoint shopping centre

Published May 15, 2024


Dipula Income Fund, which yesterday reported a slightly lower interim dividend of 24.58 (25.85) cents per share, will increase its solar power capacity fourfold before the end of its financial year, and will then treble it over the next 24 to 36 months.

Businesses, fearful of the consequences of additional load shedding on their operations, have been doing all they can to bolster renewable energy capacity. JSE-listed Dipula Income Fund owns a R9.8 billion portfolio of 166 retail, office, industrial and residential rental assets countrywide.

“Before the end of this financial year, we expect to increase our solar power capacity more than fourfold, from 1.6kWp to 7kWp in total. Then, we plan on trebling this number in the next 24 to 36 months,” CEO Izak Petersen said at the release of the results yesterday.

In the six months to February 29, Dipula awarded a contract for 5.3kWp of solar projects at nine of its properties in the first phase of a solar power roll-out. Some R50 million would be invested in this phase, which was anticipated to be completed before the end of August 2024.

Dipula’s portfolio of 166 properties was valued at R9.8bn at year end, following a slight valuation increase since August 2023, with 48% of the lettable space in retail, 34% in industrial, 15% in offices and 3% in residential properties.

Convenience, rural and township retail centres produce 64% of Dipula’s portfolio income, with 61% of its rental income generated in Gauteng. Distributable income fell 3% to R249m.

Petersen said Dipula had produced “a good set of results” for the six months and top-line growth was delivered, albeit at relatively modest levels, against a background of elevated inflation, peaking interest rates, and double-digit electricity tariff increases.

Dipula’s revenue grew 9%. Net property income increased 6% after “efficient operations” were supported by rental growth. Expenses increased modestly relative to inflation. Net asset value increased 2% to R6bn. The dividends came to 90% of distributable profit.

New leases worth R105m were concluded with renewals of R845m. The tenant retention ratio was 89%, keeping buildings well occupied, while the lease expiry profile of the office real estate portfolio doubled to three years from 1.5 years.

Vacancies improved to 8% from 10%. In the retail portfolio, vacancies reduced to 6% from 9%. In the office portfolio – which accounts for 15% of income – vacancies decreased to 23% from 27%.

Vacancies in the industrial portfolio were low at 5% compared to 4% in the prior period.

The average vacancy in Dipula’s residential portfolio was 6%, and rental growth of between 2% and 8% was recorded across the different properties.

The overall reduction in the group’s vacancy rate was mainly due to lower office and retail vacancies.

Petersen said despite signs of increased take-up of office space, the office sector continued to face pressure from the lingering effects of Covid-19 and the weak economy. While there are positive indicators, leasing activity in the office sector had progressed relatively slowly.

Dipula remains proactive in finding innovative strategies to draw office tenants, aiming to tackle the existing office vacancy.

Recent transactions reflect an improving environment, as a growing number of employees return to office spaces.

Gearing fell to a healthy 36.3% from 36.9%. The group predicted stable conditions for the rest of its financial year to August 2024, with improved performance expected in 2025 as capital projects were completed.