Dipula plans to make acquisitions
CEO Izak Petersen says the company has been patient and can now take advantage of challenges facing other funds
Dipula Income Fund, a landlord that focuses largely on Gauteng, says it plans to take advantage of low commercial property prices and make acquisitions later in 2019.
Dipula CEO Izak Petersen said that many funds are struggling in a difficult operating environment that has created opportunities.
“We have stuck to our knitting and focused on getting our assets to perform adequately over the past few months. We haven’t gone abroad and taken on new risks but rather kept our strategy in SA. Now we are in a position where we can make plays in the local market again,” he said after the release of results for the six months.
Dipula is actively looking for acquisition opportunities that includes buying portfolios or taking over other property funds, he said.
JSE-listed property companies are under pressure to decrease their relative debt levels, also known as loan-to-value (LTV), as weak rental growth persists in SA. To lower LTVs some funds have to sell assets and Dipula may be a keen buyer of some portfolios, Petersen said.
Stanlib’s head of listed property funds, Keillen Ndlovu, said there is a risk that capitalisation rates will rise as physical property values fall.
The capitalisation rate is a real estate profitability measure used to compare different real estate investments. A cap rate is the ratio between the net operating income produced by an asset and its current market value.
Dipula lowered its forecast for dividend payments for the year to end-August partly because of weak lease renewal rates.
The group said on Wednesday it expects its full-year dividend per share for A-shares and B-shares combined to decline 5%. It previously expected unchanged dividends.
“The reduction in dividend growth compared to previous guidance is due to less-than-expected lease renewal rates, higher costs of leasing, longer lead times for new leases, tenants vacating space due to changing business models and the impact of the economic slowdown on tenants,” it said.
According to its policy, A-shareholders are entitled to dividend growth of the lower of 5% or SA’s consumer price index, while B-shareholders receive the distributable income.