VENTURES AFRICA – Dipula Income Fund, a long term property investment company which made its debut on the JSE in August, is negotiating R800 million rand ($95.7 million) worth of acquisitions to grow its portfolio aggressively in the next four to six years.
Yesterday, the property loan stock company posted a strong maiden interim results for six months ended February, with distributions per A-linked unit of 39.685c (0.05c) and per B-linked unit of 27.741c (0.03c), which were in line with its guidance.
CEO Izak Petersen said the fund’s performance was in line with management’s guidance at listing and attributed the performance to meeting its rental income target, increased operating expense efficiency and effective interest rate management.
Petersen said the strategy was to grow the fund to R10 billion rands ($1.2 billion) in the next four to six years. He said the company’s portfolio growth is a priority and the aim is to acquire existing properties and developments on “turnkey basis when income-enhancing opportunities arise”.
He also indicated that the fund’s strategy was to improve the quality of its portfolio and invest in emerging market retail, focusing on expansion into Africa.
Reports indicates that Dipula’s 95 per cent retention rate on leases renewed during the period, with vacancies rising from 7.9 per cent at listing to 8.9 per cent at the end of February. But the increase in vacancies was a result of the refurbishment of a property known as Arbeid Street, in Strydom Park, which was substantially let at listing.
According to alternative Real Estate fund manager Maurice Shapiro, “Dipula gave investors the choice to invest in the safer A-linked units or the riskier but potentially great upside B-linked units.”
Investors who invest in B units earn the balance of the profits after the A unit holders have been paid. A-linked units would grow at 5 per cent a year for the first five years until the end of August 2017.
Shapiro said the fund is “well diversified” with over 175 properties, but has a retail (55 per cent) and Gauteng (75 per cent) bias, making it well positioned within a defensive sector.
“We were positively surprised with the high retention rate on leases that were renewed over the period. Management’s forecasts were more conservative”, he added.