JSE diversified REIT, Dipula Income Fund (Dipula), today announced continued distributable income growth of 11.5% for the six months to February 2018. The REIT ended the period with a portfolio of R7.1 billion, which will escalate in value to R8.5 billion on the transfer of previously published acquisitions. During the interim period Dipula finalised the internalisation of its Manco which should further enhance the alignment of interest between investors and management.
Due to tough trading conditions, vacancies increased to 10.4% compared to 9.2% at February 2017, with the industrial portfolio being the main contributor to the drop in occupancy levels. Industrial vacancies increased from 8.8% to 12.9%, while offices remained stable year on year and retail vacancies increased slightly by 0.2% compared to the same reporting period last year.
In line with its strategy, Dipula continued “sweating its assets” in the period by progressing the conversion of offices located in difficult, high vacancy secondary nodes, into 273 residential apartments. “The projects are on track for completion at the end-2018,” says Petersen.
The REIT raised R790 million, in an oversubscribed accelerated book build during April 2018. The proceeds of this book build and new debt facilities of R480 million will be used to fund acquisitions made during the period. In addition to the Setso and Rec-Group acquisition of R1.25 billion Dipula also completed the acquisition of a 50.1% stake in the Marikana Shoprite Centre for R50 million, 50% of Harding Corner retail centre for R52 million and R122 million for Firestation Rosebank offices post period.
The Setso and Rec-Group portfolio acquisition is a significant milestone and of strategic importance to Dipula as it has helped improve the quality of its portfolio and is imbedded with redevelopment opportunities for further upside in-line with its strategy. These assets boast a low 0.8% vacancy rate and an average lease expiry of 4.5 years. Marikana and Harding Corner are significantly tenanted by national tenants and the P-Grade Firestation Rosebank building enhances Dipula’s office portfolio.
By the end of the reporting period 90% of Dipula’s interest rate exposure was hedged and R557 million of its expiring debt was refinanced.
Petersen does not expect material relief in trading conditions in the near-term. He says the dividend growth forecast to year-end is therefore more conservative at 4%-5%. “We have increased our bad debt provisions and expect some delays in the transfer of newly acquired earnings enhancing properties.”
Petersen concludes: “Our goal remains portfolio strength and sustainability with an increased average size and value per property. To this end we will focus on bedding down new acquisitions, managing tightly, leasing vacant space, unlocking existing value and disposing of non-core properties.”
The Dipula counter closed Friday at DIA: R10.14 and DIB: R10.00.