Following the implementation of deals that were currently under way, real estate investment trust Dipula Income Fund should reach the halfway mark of its goal to increase its portfolio to R10-billion within the next three to five years, during the next year, Dipula CEO Izak Petersen said on Friday.

Addressing shareholders at a presentation of the company’s results for the 12 months ended August 31, he said Dipula had a strong pipeline of future acquisitions, adding that it was, therefore, on track to reach its goal.

During the financial year under review, the company’s portfolio grew by 54% from R2.4-billion to R3.75-billion, driven by capital appreciation of 8.3% and acquisitions of R1.1-billion.

“In the short- to medium-term, Dipula will focus on continuing to acquire portfolio-improving assets, while disposing of its underperforming noncore assets, in line with its strategy of building a diversified and resilient portfolio, while delivering sustainable income growth,” he said.

Further, the company would undertake strategic portfolio-enhancing revamps and redevelopments, while also diversifying its sources of debt finance and reducing its overall funding rate.

“Currently, we are funded only by commercial banks, but with the status quo now, given our size, the time is right to get into the depth of the market. This is something we have approached a bit slower than some of our peers, but that was for good reason, as it is expensive to go in if you are too small,” Petersen explained.

Meanwhile, Dipula would also focus on improving the tradability and liquidity of its units, lengthening its lease expiry profile, improving and retaining the quality of its tenants, improving its property management processes and systems, and improving the energy efficiency of its buildings.

Petersen stated that energy efficiency had become more important, as tenants were experiencing increasing pressure from rising electricity costs.

“Therefore, we have to adapt our product,” he said.

RESULTS
During the period under review, Dipula achieved a 7% increase in total distribution growth to 149.98c.

The company reported that its total distribution attributable to its A-linked units increased by 5% to 83.39c, while full-year B-linked distribution increased by 9.6% to 66.64c.

During the year, Dipula’s market capitalisation climbed from R1.8-billion to R2.8-billion.
Petersen attributed the company’s solid performance to Dipula’s strategy of improving the quality of its growing diversified property portfolio to deliver inflation-beating income growth sustainably.

“We acquired good assets on an income-enhancing basis and we are running our portfolio efficiently as shown in the favourable expense-to-income ratio of 20.7%,” he said.

Meanwhile, the company’s acquisitions for the year totalled more than R1.1-billion at an average yield in excess of 9.8%, which helped increase revenue.

“During the period, Dipula’s distributable income increased by 45.5%,” Petersen highlighted, adding that the company had also sold and transferred 13 properties valued at a collective R27.2-million.

“Despite the fact that we expect the operating environment to remain tough in the 2014 financial year, especially for office properties, we are committed to extracting maximum value from our portfolio and improving it with new acquisitions. We expect distribution growth for the 2014 financial year to be between 7% and 8%,” Petersen said.

He noted, however, that Dipula was concerned about the current state of the economy, as the property industry did not operate in isolation, adding that greater economic recovery was needed for the industry to be successful in the longer term.