Black Economic Empowerment (BEE) property player Dipula Income Fund has achieved substantial growth since listing on the JSE last year and declared yesterday that it has met its forecast for the year ended 31 August 2012 as set out in the pre-listing prospectus.
Dipula Income Fund is a listed property loan stock company formed through the merger of Mergence Africa Property Fund and Dipula Property Fund, two majority black-owned property funds. Dipula has approximately 26% black shareholding, which is amongst the highest in the South Africa listed property sector. It is managed externally by Dipula Asset Management Trust, a 100% BEE company.
At the end of the year Dipula owned 176 properties valued at R2.4billion. Dipula has also announced further acquisitions of roughly R1.3bn.
“We are making excellent progress growing and improving our portfolio of properties. The value of our property assets increased by 14% during the year. We also sold 16 smaller non-core properties. We expect the average property value to increase from about R12 million to R 20.8 million after the implementation of announced acquisitions,” says Petersen.
Total distributions for the year came in at 79.370 cents per A-linked unit and 60.821 cents per B-linked unit. Dipula’s total return to unitholders for the year was 30% for A-linked units and 24% for B-linked units.
Izak Petersen, CEO of Dipula, attributes this to good performance from Dipula’s core portfolio. Its experienced management and appropriate strategies also contributed to Dipula’s positive performance for its first full year as a JSE-listed property loan stock company.
The South African economy is expected to grow at just above 2% due to sustained local and global economic pressure. Despite this, Petersen says that Dipula’s distribution growth is anticipated to be between 7% and 9% for its 2013 financial period. Accordingly its A-linked unit distribution is expected to achieve its preferential growth rate of 5% and distribution growth for Dipula B-linked units is anticipated to be between 9.7% and 14.3%.
“South Africa’s property sector faces several challenges including sharp increases in the cost of rates and electricity which are being passed on to property owners and tenants,” says Petersen. “Despite this, income-enhancing acquisitions, efficient management of costs and reducing portfolio vacancies will enable us to deliver distribution growth to our investors.”
Dipula invests in a geographically and sectorally diversified property portfolio, with a retail bias. Represented in nine provinces, around two thirds of its assets are in the economic hub of Gauteng.
“Dipula’s portfolio growth strategy targets portfolio enhancing properties, with a bias to retail property. Our retail assets have proved to be defensive in recent years,” says Petersen.
Petersen notes that Dipula has a good pipeline of acquisitions and investors can expect further portfolio growth and improvement in the coming year. Vacancy levels currently at 10.4% will also remain a priority. “Our asset management and leasing team will focus on reducing vacancies in the office and industrial sectors. The demand for retail space remains relatively strong.”
Broadening its sources of funding, Dipula is considering raising debt in the debt capital markets. After its year end, Dipula undertook a capital raising exercise which was significantly oversubscribed.
Petersen notes the keen uptake of its private placement is a display of investor confidence and has increased Dipula’s unitholder spread, which has a positive impact on liquidity and tradability of the company’s linked units.