Dipula Income Fund CEO Izak Petersen
Real estate investment trust (REIT) Dipula Income Fund increased its distributable earnings by 16% year-on-year to R249.12-million during the year ended August 31, translating into a 7.2% growth in distributions a unit, exceeding management’s guidance of between 6% and 7%.
Dipula’s total distribution attributable to A-linked units increased by 5% to 87.5c, while Dipula’s B-linked units showed distribution growth of 10% to 73.33c.
During the year under review Dipula had also grown its portfolio by more than R1-billion to R5.4-billion.
Dipula CEO Izak Petersen described the period’s results as credible and stated that it was in line with what the company expected to achieve.
Petersen attributed the strong performance to Dipula’s strategic growth to its portfolio enhancing assets, vigorous leasing, incisive property management, unlocking value from its properties with refurbishment and astute debt management.
“These results are further testimony to our good record in delivering on our strategy. In the three years since Dipula’s listing in 2011, we have doubled our market capitalisation to R2.8-billion at year-end, increased our portfolio with good quality assets by 158% to R5.4-billion, while our average value a property within our portfolio surged by 60% to R30-million. Our legacy portfolio now only comprises 31% of our total assets,” Petersen stated.
Meanwhile, Dipula reduced its portfolio vacancies from 12% at its half-year to 9% at August 31, with signficant improvements in its industrial and retail portfolio occupancy levels.
Petersen pointed out that industrial vacancies had dropped by 44% year-on-year, while retail vacancies were 7% less than that of the prior year.
He added that office vacancies, which increased by 25% year-on-year to leave 18.8% of its space unleased, were still “a bit of a concern”.
However, Petersen pointed out that Dipula had, post year-end, leased some additional space in Randburg and Bruma, which would bring this figure down to about 14%.
Dipula closed the period with conservative gearing of 37.2%, while 76% of its debt was now fixed at an all-in blended rate of borrowing of 8.67% for an average of 3.3 years.
In an effort to diversify its sources of funding, Dipula appointed Nedbank and Standard Bank to arrange its R2-billion domestic medium-term note programme for entry into the debt capital markets. Moving a step closer to launching this programme, Dipula achieved a BBB rating from Global Credit Ratings.
FUTURE OUTLOOK
Petersen pointed out that Dipula was bullish about the future, stating that as the large industry players grew there was an ever increasing gap for medium-sized REITs, such as Dipula, to play in.
“We see a lot of deals. . . there is no lack of opportunities but we are still being selective,” he said.
Petersen added that while Dipula would eventually like to move into the rest of Africa, for the time being, the fund would continue to focus on South Africa.
“We believe that current conditions favour patient and accomplished investors with the ability to execute transactions. Dipula expects to make acquisitions of R1-billion to R1.5-billion in the coming 12 to 18 months, which will then bring our portfolio to about R7-billion,” he noted, expressing that the company was well on its way to reaching its target of having a R10-billion portfolio over the next three years.
“Our focus is always on properties that can deliver income in a sustainable manner,” Petersen added.
Furthermore, he stated that Dipula would continue to dispose of noncore properties and extract value from its existing portfolio through well-yielding, demand-driven refurbishments and extensions, with tenant retention and leasing to remain a core income driver.
He highlighted that Dipula expected to achieve distribution growth of between 7% and 8% during the 2015 financial year, stating that despite recent activity in its shares, Dipula was not aware of any corporate activity that would enhance or further its strategy and be in the best interest of all unitholders.