JSE-listed diversified real estate investment trust (Reit) Dipula Income Fund’s revenue exceeded the R1-billion mark for the first time since its inception.
Revenue increased by 46% in the year ended August 31, while the Reit’s distributable earnings soared 15.8% to R384.6-billion, despite challenging market conditions.
CEO Izak Petersen attributed this to the group’s strong internal asset management. “Our largely organic growth reflects the strength of our strategy to grow and develop our portfolio in such a way as to ensure it continues to perform even under tough conditions. We have been buying well and managing brilliantly.”
He added that the consequent distribution growth was at the upper end of Dipula’s previous distributions guidance for the year.
The company continued its distribution growth trend despite the challenging property market, with an 8% increase year-on-year to 185.97c a share for the year to August 31, off the back of mainly organic growth. This translates into growth in distribution per A share of 5% and 11.5% per B share.
On the back of R1.2-billion in acquisitions, the property portfolio increased 27% year-on-year to above R7-billion, marking considerable growth from the R2-billion at the company’s listing in 2011.
Net asset value a share grew 12% to R10.46 as a result of positive portfolio revaluations of R284-million.
The group continued refurbishments and enhancements of the portfolio at a cost of R100-million. “The success of this strategy is evident in the R60-million invested in Renaissance Park, which saw a new blue-chip tenant brought onstream at higher-than-budgeted rentals.”
Retail property Score Ivory Park was also successfully completed during the year at a cost of R11-million.
Development and revamp projects to the value of R350-million are planned and due for completion over the next 18 months at an average yield of 11%.
An increase in office vacancies owing to low economic growth pushed total vacancies for the year to 8.5% from 8% in the prior year. Industrial vacancies improved and retail vacancies stayed just about on par with last year.
Petersen pointed out that, since year-end, vacancies dropped to 7.8%, which is below last year’s level. “Our tenant retention rate was at an impressive 89% during the year, with A- and B-grade tenants accounting for the majority at 87%. This is also affected by strategic vacancies related to revamps and upgrades,” he added.
A positive rental renewal rate of 5.2% was also achieved on the portfolio.
Since listing, the portfolio has bolstered its defensive nature through increased diversification, with retail assets now accounting for 70% of revenue, offices 16% and industrial the balance. At listing, retail and office had stood at 52% and 32% respectively.
“We have made further strides in our strategy of increasing the average size of properties to over R50-million,” Petersen added. The current average size is R35-million.
Looking ahead, Petersen does not expect the difficult economic and market conditions to ease soon. “Given the macroeconomic environment, Dipula will continue to focus on rolling out our proven growth strategy and extracting the maximum value from the portfolio.
Dipula expects growth in distributions of between 6% and 7% for the 2017 financial year.
Meanwhile, the fund ranked seventy-fourth on the The Sunday Times Top 100 Companies. Petersen said this was further evidence of the group’s solid growth and performance over the past five years.
The awards track companies with the highest shareholder returns over the past five years.