Lockdown stunts Dipula’s acquisitions and sales, CEO laments
Deals are difficult to finance while companies cannot operate and business people are reluctant to meet
The Covid-19 pandemic has halted Dipula Income Fund’s plans to review its portfolio, including selling its nonperforming assets, with potential buyers unable to finance deals. SA has been on lockdown for about two months, halting economic activities.
Dipula’s property portfolio of 190 properties — including offices, retail and industrial buildings — was valued at R8.9bn, an increase of 3.6%.
“While we aren’t desperate to part with any assets, lockdown means we can’t make any changes to our portfolio, be it through acquisitions or sales,” said CEO Izak Petersen after the company released its half-year financial results to February.
He said he is hopeful the lockdown will be more relaxed as many of Dipula’s tenants are battling and some are at risk of closure. Petersen said Dipula is offering rental relief where possible, but many smaller tenants have been unable to pay any rent as they are not allowed to trade under the lockdown regulations.
Dipula’s revenue was down 1.1% to R680.1m. Net operating profit fell 4.0% to R439.7m.
Petersen said Dipula’s performance in the reporting period had been resilient. “The group’s performance was achieved against a backdrop of extremely weak trading conditions globally and in SA. Post-period-end, SA entered a Covid-19 lockdown that has undoubtedly exacerbated the already dire situation,” he said.
Dipula, which owns Chilli Lane mall in Sunninghill and Alberton Mall on the East Rand, decreased its vacancies by 27.5% to 5.8%. It also concluded leases worth R370m. During the six months to end-February, Dipula secured 78 new tenants whose lease values were R94m and renewed 112 leases, equating to R58.53m, worth R276m over the lease term. The lease terms were roughly three years for new leases and renewals.
“Our industrial leasing went particularly well, reporting a vacancy of 2.8% compared to 8.0% in the comparable period,” said Petersen. The group invested R28m in existing properties.
Head of listed property funds at Stanlib, Keillen Ndlovu said Dipula’s results were better than expected.
“Dipula needs to sell assets or find a solution to reduce its loan-to-value ratio from the current 40% to preferably below 35%. They will also need to increase the debt expiry profile over time to preferably over three years,” he said. Dipula’s debt expiry profile sat at about 2.3 years.
Dipula’s board deferred its decision regarding the declaration of an interim dividend.
“The effects of the pandemic on human lives and its consequences on human suffering are likely to be with us for a long time to come, as the world battles to find solutions. Now, more than ever, humanity needs to stand together and provide support to the most vulnerable of our society,” said Petersen.
He said the group’s “immediate focus is capital preservation and liquidity, ensuring the safety of our staff, tenants and shoppers, as lockdown restrictions are gradually lifted. We will keep the market updated as the impact of the pandemic becomes more apparent.”