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Dipula Income Fund reduces gearing, records 12.4% drop in distributable earnings for the year ended 31 August 2020

Posted On Wednesday, 18 November 2020 11:49 Published by
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South-African focused JSE-listed diversified REIT, Dipula Income Fund, today announced results for the year ended 31 August 2020 against a backdrop of substantial economic headwinds, exacerbated by Covid-19 (or “the pandemic”) related lockdown measures (“the lockdown measures”.)


Management’s efforts to continuously optimise the portfolio and its defensiveness through strategic interventions and asset management initiatives proved useful as the portfolio grew by 3% to R9.1 billion from R8.8 billion in the prior year.

“We are delivering on our diversification strategy and have taken transfer of our stake in Palm Springs, Cosmo City on 01 July 2020. This brings our residential exposure by value to 2%. Our medium-term goal is 10%” commented CEO Izak Petersen.

The 50.1% interest in Palm Springs was acquired for a total consideration of R121.6 million, settled with R71.8 million cash and debt of R49.8 million.

The Group’s Net Asset Value (NAV) was maintained at approximately R10.00 per share. “NAV is a true measure of long-term value creation and we are pleased that we have sustained value under trying times” states Petersen.

The Group had invested R43.1 million in portfolio improving refurbishments, including upgrades at Belle Ombre, Kopanong Tembisa, Norwood Urban Village, Howick Mews, the extension of Range Road, the installation of water storage tanks at Corporate Park and a rooftop solar installation at Harding Corner.

Dipula disposed of five non-core properties for a combined sales price of R63 million and an average yield of 10.1%. 

Petersen further said that despite the challenges, Dipula’s leasing performance was pleasing under the circumstances. The Group concluded 136 new leases for a total gross lettable area (“GLA”) of 39 710m2 at a weighted average escalation of 7.5% and a weighted average lease expiry (“WALE”) of 2.9 years.

He states that 114 267m2 of GLA was renewed at an average rental increase of 0.1% (2019: 1.1%). The Group reported moderately positive renewal rentals for the retail portfolio at 0.7% (2019: 2.2%). Negative reversions of 0.4% (2019: +3.5%) and 0.9% (2019: -8.2%) were experienced in the office and industrial sectors, respectively.

The portfolio vacancy rate increased slightly to 6.9% from 5.8% in the prior year.

Dipula reported a reduction in gearing from 40.4% in the prior year to 38.9%, and an interest cover ratio (“ICR”) of 2.62 times, well within its strictest debt covenant levels of 45% loan to value and an ICR of 2 times.

During the year under review, debt totalling R773 million was renewed at an average funding rate of 5.32% for an average period of 2.6 years. Dipula further raised new facilities of R100 million at an average funding rate of 6.25% for a 5-year tenure. The group had undrawn facilities of R226 million at year-end.

All Dipula’s debt is Rand denominated and at financial year-end, total debt amounted to R3.5 billion at an all-in blended interest rate of 8.96% (2019: 9.29%). The weighted average debt expiry profile was 2.2 years, with interest rate hedges expiring in 1.8 years on average. At the end of the financial year 68% (2019: 78%) of the Group’s interest rate exposure was hedged.

Performance was impacted negatively by existing conditions but in spite thereof revenue remained flat at R1.3 billion year-on-year. Notwithstanding this reasonable top-line performance, the extended Covid-19 lockdown and other challenging economic headwinds resulted in distributable earnings declining by 12.4% (R64 million) year-on-year to R447 million from R511 million previously. This was driven in the main by rental relief packages to tenants of approximately R50 million and higher than normal increase in provisions for bad debt of R11 million (2019: R3.4 million).

“This was an extremely tough year. We are pleased with the defensive nature of our portfolio and exceptionally grateful for the hard work that our team has been putting in over the years and particularly during the pandemic. The Covid-19 tenant support granted was deeply felt in our pockets, but we are pleased we could assist and contribute towards their survival and the preservation of much needed employment,” commented Petersen.

“The long-term impact of COVID-19 will constrain economic growth in the short to medium term, especially considering uncertainty around a possible second wave should effective vaccine trials take longer than expected.

“In light of these consideration, our focus in the short term will remain on maximising free cash flows (liquidity), renewing expiring debt facilities and preserving and strengthening our balance sheet,” concluded Petersen.


  • Property portfolio growth of 3% to R9.1 billion
  • Diversification strategy progressing with 428 units added to portfolio
  • Net asset value per share maintained at R10
  • Gearing reduced to 38.9%
  • R773 million of debt renewed and R100 million new facilities raised
  • Distributable earnings down 12.4%
  • Rental relief of R50 million granted to tenants to counter the negative impact of Covid-19
Last modified on Wednesday, 18 November 2020 18:19
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