Despite having faced a challenging operating environment in 2017, residential-focused real estate investment trust (Reit) Indluplace has grown the value of its portfolio by 82% year-on-year to R4-billion at the end of the six months ended March 31.

This follows the Buffet portfolio acquisition, which became effective on October 1, 2017, and which added 2 803 units spread across 48 properties at R1.4-billion, bringing the total units owned by Indluplace to 9 662, representing unit growth of 74% year-on-year.

The Buffet portfolio acquisition, and the acquisitions valued at R475-million added to its portfolio in July 2017, brought the Indluplace portfolio value to just over R4-billion, Indluplace FD Terry Kaplan said on Wednesday.

“From that point of view, it has been a transformative year for Indluplace.

“We have now successfully completed a complex handover of the 2 803 units from the Buffet transaction. Together with our experienced and specialised property managers, we worked hard to integrate the Buffet properties into our broader portfolio and are pleased with the performance thereof,” Induplace CEO Carel de Wit told Engineering News Online.

In a period characterised by difficult market conditions, and a complex handover of the very large Buffet portfolio, Indluplace was again able to demonstrate the defensive nature of its diverse residential portfolio, and, despite a tough first six months ended March 31, remains on track to deliver dividends for the full year in line with the lower end of guidance. 

Among difficult market conditions, Indluplace experienced delays with resolving the partial rent boycott in Windsor, Johannesburg, between six and nine months ago, where between 20 and 30 blocks of flats and individual sectional title units were highjacked, caused chaos in Windsor East.

About a third of Indluplace’s properties in the area participated in the partial rental boycott, with the bulk of the evictions having taken place in the beginning of April. The remaining property evictions are set to follow.

Owing to a strong demand in the area, De Wit explains that units in Windsor will be re-let as the properties are being vacated and restored.

“For the full year, we’re expecting to get to the bottom end of our guidance. We’ll be growing the full year dividend by around 4%, which is within our guidance, but definitely at the bottom end of that guidance,” De Wit mentioned.

Indluplace declared a dividend of 48.56c for the six months ended March 31.

Although vacancies increased from 4.5% as at March 31, 2017, to 6.3% in the period under review, De Wit said that vacancies have decreased since the period end.

Indluplace continues to work closely with property managers to implement strategies to reduce vacancies.

Meanwhile, solid progress has been made in resolving Windsor’s partial rental boycott issue, and the company is now in a position to begin re-letting units.

Following legal proceedings and evicting several tenants who participated in the rental boycott, Indluplace is expecting to see results of this reflecting in the second half of the year.

“Given the headwinds experienced, we are happy with the performance of the portfolio over the period, and satisfied that we are on a solid base to continue to provide sustainable, defensive income in the coming years.”

Meanwhile, Kaplan explained to Engineering News Online that secured financial liabilities increased from R199.6-million to R1.3-billion over the reporting period, with Indluplace in a position to be able to draw on a R1.5-billion facility in total, when taking into account the R200-million Standard Bank three-year facility. Indluplace had drawn on R1.3-billion of total facilities as at March 31, resulting in a loan-to-value of about 29.4%.

The company’s revenue, excluding straight line rental income, has increased from R195-million as at March 31, 2017, to R334.7-million in the period under review as the full effect of the acquisitions concluded during the current and previous financial year, as well as escalations, are considered.