Portfolio potential helps lift Dipula distributions

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Dipula Income Fund CEO, Izak Petersen explains that the company continues its strategy of portfolio growth which increases the quality, size and value of its assets. Dipula Income Fund CEO, Izak Petersen explains that the company continues its strategy of portfolio growth which increases the quality, size and value of its assets.

PROPERTY loan stock company, Dipula Income Fund yesterday reported distribution growth of 5% for A linked units and 8.5% for B linked units for its six-month period ended February 2014.

Its half-year results showed a 45.2% increased revenue and a 40.7% surge in net property income, while its distributable earnings were higher by 14.9% relative to the prior interim period.

Dipula Income Fund CEO, Izak Petersen says the company is continuing its strategy of portfolio growth which increases the quality, size and value of its assets, while intensifying its focus on leasing, improved property management and diversifying its funding sources.

In the financial period, the Fund increased its property portfolio value to R4 billion. It took transfer for acquisitions totalling R267 million and announced new acquisitions worth R366 million.

In less than three years since listing in 2011, Dipula has more than doubled the value of its portfolio with quality assets, growing it by R2,6 billion even while disposing of 21 non-core property assets.

Dipula’s average property value has increased from R12m to R23m, reflecting solid progress towards its target of R50m per average property value. Its average property size has grown from about 2,500m2 to more than 3,225m2

Notwithstanding a tough operating environment, Dipula sustained its decidedly efficient cost-to-income ratio at 20.3%.

The group’s property portfolio comprises 179 retail, industrial and office properties. By size, Dipula’s portfolio is 71% concentrated at the centre of South Africa’s economic activity in Gauteng. It is also weighted towards retail property which comprises 55% of its portfolio.

While its overall portfolio vacancy level softened from 9.1% to 11.8% during the period, it has since improved to 9.0%. “Some of the vacancies were for strategic revamps while others were attributable to deliberate tenant recycling as some tenants came under pressure in the current economic climate,” says Petersen.

“The benefits of Dipula’s diversified portfolio are evident in this market where retail and industrial assets, which collectively comprise 77% of our portfolio, are shielding the weaker office sector.”

However Petersen confirms that there are general high levels of tenant churn, especially in the competitive office sector where there is little new tenant demand.

The group has also undertaken portfolio enhancing refurbishment and redevelopments. These include the revamp of its Atlas Road property in Gauteng, Range Road in Western Cape and the extension of Bochum in Limpopo. And has R3 billion pipeline of potential acquisitions.

The company closed the period with gearing of 38.1% and 67% of its debt fixed at a weighted average cost of borrowing of 8.42% with fixes ranging from one to four years in length.

Despite a challenging economic environment coupled with increasing interest rates, Petersen expects the company to achieve full year per unit distribution growth of between 6% and 7% on a combined basis.

Dipula is a JSE-listed REIT that is distinguished for its B-BBEE credentials of the fund and its Manco. It originated from two majority black-owned property funds, Mergence Africa Property Fund and Dipula Property Fund.

In March this year, Arrowhead Properties bought 34,5 million Dipula Income Fund B linked units from Investec Asset Management. The deal represented 22% of Dipula’s B linked units acquired and Arrowhead is to become a 11% shareholder in Dipula Income Fund.

The transaction confirms that the listed property sector is moving from a cycle of new listings into consolidation.


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