Diversified real estate investment trust (Reit) Dipula reported a rise in interim net asset value (NAV) on the back of strong performance by the retail portfolio.
NAV for the six months to end-February rose 7% year on year to R5.9bn from R5.5bn in 2022.
CEO Izak Petersen told Business Day that retail rentals were well sustained during the reporting period, along with positive reversions which boded well for the portfolio.
“Demand by retailers expanding and increased leasing activity will continue to drive performance within this portfolio,” he said.
Petersen said their retail portfolio of mainly convenience, rural and township retail centres continues to prove defensive, notwithstanding a deterioration in the domestic macroeconomic environment, with rising interest rates and unprecedented levels of load-shedding.
Dipula owns 179 properties including retail, office, industrial and residential property assets throughout the country, mostly in Gauteng. The portfolio, valued at R9.6bn, has a gross lettable area (GLA) of 915,243m², about the size of 130 soccer pitches. Retail accounts for almost half of the GLA and generates nearly two-thirds of gross income.
For the six months ended in February, the retail portfolio achieved on average 4% positive rental reversion on renewed leases. During the period, Dipula concluded 99 new leases worth about R120m, with most of these being retail. The weighted average escalation of these leases was 7.3%, with a weighted average lease expiry of three years.
He said the revamps and refurbishing of some of its malls has resulted in improved trading and falling vacancies. Vacancies have reduced from 10.8% in 2022 to 9.4%.
Petersen said the reduction in retail vacancies will be driven mainly by relooking its tenant mix and re-tenanting highly lettable space such as vacant space left by Game at Gillwell Mall. This space was leased to Boxer.
Leasing activity is progressing well at Atrium @ 45, with trading expected to start in April 2024. Upgrades at Chilli Lane and Chilli on Top in Sunninghill. Johannesburg. will start in 2023.
As part of its asset optimisation strategy, Dipula invested about R63m from R45m in 2022 in the refurbishment and redevelopment of its properties. The restorations of properties damaged in the July 2021 riots was completed in November 2022.
By the end of the reporting period, the Amandla Boulevard in Braamfischerville and Fin Forum refurbishments had been completed, with upgrades to Gezina Galleries, Gillwell Mall, Sterkolite, Kroonstad Circle and Range Road at advanced stages.
Petersen said proceeds from asset disposals would be used to reduce debt, recycled back into the portfolio and invested into solar projects to mitigate against load-shedding. He said the company continues with strategic asset revamps, especially retail, to improve income quality by swapping less creditworthy tenants to creditworthy tenants.
He also said though the balance sheet remains strong, the company hopes to finalise its debt syndication process by the end of the financial year.
This exercise entails taking all its assets into one debt pool.
In this way, funders share in the enhanced asset quality and diversification across the portfolio and not just on specific assets.
Update: May 17 2022
This article has been updated with new information from Dipula CEO.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.