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Archives for November 2024

Dipula shines with solid results, solar roll-out and strong prospects

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Dipula shines with solid results, solar roll-out and strong prospects

JOHANNESBURG, 13 November 2024 — Dipula Income Fund (JSE: DIB) has reported a solid set of results for its financial year to 31 August 2024, delivering strong operational, financial and strategic progress. Dipula’s property portfolio produced growth and increased by 4% in value to R10.2 billion, contributing to a 5% rise in net asset value.

Dipula is a prominent South Africa-invested REIT with a diversified portfolio of 165 retail, office, industrial and residential rental properties. Convenience, rural and township retail centres produce 65% of its defensively weighted portfolio income, and 60% of portfolio rental income is generated in Gauteng.

Izak Petersen, CEO of Dipula, comments, “South African trading conditions and consumer sentiment are improving post the July 2024 national elections. The new Government of National Unity has been well received, with parties committed to enhancing service delivery. Global and local interest rate cuts, easing inflation, and a stronger Rand also bode well for the economy. We anticipate these macroeconomic improvements will positively impact the property market in the short to medium term.”

Despite recent improvements, the 12 months to 31 August 2024 were challenging due to rising property costs and interest rates at their peak. “Notwithstanding the challenging operational and financial environment, Dipula delivered a good set of results,” adds Petersen.

Dipula’s revenue grew by 7% despite negative rental reversions in government-tenanted offices and lower income due to prior-year disposals. Net property income increased by 2%, under pressure from above-inflation municipal hikes that significantly increased property expenses, higher maintenance spending, and rising third-party contract labour costs. Net finance costs increased by 3%. Overall, prior disposals, bigger expenses and higher finance costs led to a decrease in distributable earnings per share of 4%. The declared dividends totalled 90% of distributable earnings.

Operational results were distinguished by high levels of active leasing. Dipula concluded leases worth R1.4 billion during the year, keeping its portfolio well occupied with longer leases. It achieved robust tenant retention, improved from 84% to 87%, with R1.2 billion of leasing representing renewals.

Retail vacancies improved from 7.5% to 6.4%. However, the overall portfolio vacancy rate was 7.5%, up from 6.0% in the previous year, primarily due to higher vacancies in the office and industrial sectors.

Dipula’s 83 retail properties offer well-located trading spaces and convenient access for shoppers. Each property is tailored to meet the specific needs of the local area, providing essential goods and services that resonate with the community. All tenant categories reported positive turnover growth, with health and beauty, restaurants and fast food, liquor, and hardware delivering the strongest growth. When tenants chose not to renew their leases during the year, Dipula secured replacement rentals at a 14% higher rate. The retail portfolio’s value increased by 8%.

Accounting for 16% of rental income, Dipula’s office spaces offer flexible, modern work environments that cater to the diverse needs of businesses in prime urban locations. While the office portfolio ended the year with a vacancy rate of 22%, Dipula anticipates a gradual recovery in line with recent sector improvements, supported by limited new development activity that will further support rising occupancy rates and healthy rental growth.

Dipula’s mid-sized industrial and logistics facilities in strategic locations represent 14% of its rental income. With a vacancy rate of just 3%, this strong, stable portfolio boasts the lowest vacancy across Dipula’s assets.

Its residential properties provide affordable, high-value housing in economically vibrant locations. This portfolio is 4% of rental income and recorded an average vacancy for the 2024 financial year of 6%.

Dipula’s commitment to tight cost control is evident in its improved administrative cost-to-income ratio, which reduced from 4.4% to 3.3%. While the overall cost-to-income ratio temporarily rose to 42.3% (2023: 39.5%), this increase was mainly driven by elevated property-related expenses and lower municipal cost recoveries. This is, however, expected to return to normal levels of around 40%.

Diligent asset management enables Dipula to reduce risk and improve its portfolio with various value-adding strategies. It invested R169 million in refurbishments and capital expenditure during the year. It also disposed of properties for R37 million, with proceeds funding value-enhancing revamps and the roll-out of renewable energy and backup power.

“We’re building a future-fit portfolio by investing in sustainable assets. This year, we rolled out the first phase of our solar photovoltaic programme, which is now live at nine of 10 sites. The project increases Dipula’s solar power capacity by 5.3 kWp, taking it from 1.6kWp to 7kWp – a number we plan to treble in the next 24 to 36 months. We also invested in waste and water management, community investment, staff training and wellness, and nurturing new talent through internships,” reports Petersen. Dipula’s sustainability strategy rests on a systematic process, pinpointing and tackling risks and opportunities that matter most to its business and stakeholders, guided by the UN’s Sustainable Development Goals.

Dipula’s prudent balance sheet management underpins its consistent, sustainable financial returns. It restructured its debt facilities from 1 March 2024 with a R3.8 billion syndication programme, extending its weighted average debt expiry period significantly from 1.9 years to 4.1 years. Dipula maintained debt levels comfortably above all covenant requirements, with a year-end gearing of 35.7%, an ICR of 2.7 times, and undrawn facilities of R80 million. Solid balance sheet metrics ensured Dipula‘s credit rating was affirmed at BBB+(ZA) and A2(ZA), respectively, with a stable outlook.

Looking ahead, the long negative cycle for South African real estate is showing signs of improving. Research highlights stronger leasing performance across office, retail, industrial and residential properties.

“As inflation eases and the power grid stabilises, we foresee rental growth and a slowdown in cost increases. This should bolster business and consumer confidence, potentially spurring economic investment and strengthening property fundamentals, despite navigating ongoing challenges presented by failing municipalities,” notes Petersen.

The company expects better performance from the 2025 financial year, having completed various capital projects. Dipula’s retail and industrial portfolios are poised to continue their robust performance, while the office sector is expected to experience a gradual recovery. High occupancy levels are anticipated for the affordable residential sector, with rental growth that at least keeps pace with inflation. Dipula expects distributable earnings growth of at least 5% for the year ahead.

“Dipula’s strategy prioritises capital allocation to energy sustainability, portfolio- and income-enhancing developments and elevating tenant quality. Discerning investment decisions, positive economic trends and focused management will drive improved performance and continue to deliver sustainable value for our stakeholders,” Petersen concludes.

Growthpoint’s shines with four prestigious green building awards 

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Growthpoint’s property portfolio shines with four prestigious green building awards 

Growthpoint Properties (JSE: GRT), the leading real estate investment trust, has been honoured with four prestigious awards for environmentally innovative initiatives at its buildings by the 2024 Green Building Council of South Africa (GBCSA) Leadership Awards. These accolades recognise Growthpoint’s unwavering commitment to environmental sustainability, pioneering work in green building practices and collaboration with leading lights who, together, are driving a greener, more sustainable South Africa.

The 2024 GBCSA Leadership Awards are presented to those who have demonstrated an unwavering commitment to the goal of a climate positive future and acknowledge excellence in green building initiatives, which includes energy efficiency, water conservation, indoor environmental quality, transport, materials, land-use ecology, management, and innovation.

“We are incredibly proud of these prestigious GBCSA awards,” says Engelbert Binedell, Growthpoint’s Chief Operations Officer. “These honours reflect the valuable contributions of our tenants, accredited green building professionals, business partners and the team at Growthpoint. They underscore our dedication to creating sustainable, environmentally responsible properties that benefit our stakeholders, and especially our tenants and the communities we serve.”

The four awards for certified green building excellence at Growthpoint properties include:

Best Quality Submission – Existing Building Performance: Recognising excellent performance in Green Star existing building ratings

  • Joint winner: Woodmead Estate, which holds a 4-Star Green Building Performance certification
  • GBCSA Accredited Professional: Mary-Anne Fechter, Zutari

Highest Rated Building (Existing Building Performance): Honouring the highest-rated building in Green Star existing building ratings

  • Winner: Serra Services, Meadowbrook Estate, boasting a 6-Star Green Star Building Performance certification
  • GBCSA Accredited Professional: Danikay Taylor, Imbue Sustainability

Best Quality Submission – Asset Rating Design: Recognising excellent quality in Green Star design tools

  • Winner: The Anglo American fit-out at 144 Oxford, certified 6-Star Green Star Interiors
  • Accredited Professional: Yovka Raytcheva-Schaap, Zutari

Highest-Rated Building – Asset Rating Design: Honouring the highest-rated building in Green Star design tools

  • Winner: The Anglo American fit-out at 144 Oxford, 6-Star Green Star Interiors
  • Accredited Professional: Yovka Raytcheva-Schaap, Zutari

“These awards demonstrate our ongoing commitment to developing, owning and managing properties that minimise environmental impact while providing healthy, productive workspaces and working with others to help address global and local climate challenges,” adds Binedell. “We are dedicated to continuing our leadership in green building practices and contributing to a more sustainable future.”

Growthpoint’s goal is to be carbon neutral by 2050. Moving closer to its ESG (Environmental, Social, and Governance) targets, its progress includes 123 current green building certifications for its properties, as well as securing access to a rapidly growing reliable mix of renewable energy sources – electricity from water, on-site and remote solar, and wind – for tenants to access through its e-co2 benefit scheme, being the first of its kind in South Africa. Thanks to a PPA with Etana Energy, Growthpoint will begin wheeling 195 GWh/y of renewable energy to select buildings starting from July 2025.

Stor-Age grows it portfolio and continues to deliver

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STOR-AGE GROWS ITS PORTFOLIO TO 107 PROPERTIES AND CONTINUES TO DELIVER 

JSE REIT Stor-Age, South Africa’s leading and largest self storage property fund, maintained its resilient financial performance for the six months to September 2024, delivering growth in its distributable income per share of 3.5%. On the back of another excellent operational performance at the property level, Stor-Age continued its track record of consistent earnings growth. The Company continued executing its strategic growth strategy, adding a further 10 properties to the portfolio over the past 12 months, taking the total number of properties to 107.

Stor-Age CEO Gavin Lucas commented, “Stor-Age has once again delivered an impressive financial and operational performance over the past six months. We continued to expand our portfolio, opening eight properties during the period and increasing the combined value of the portfolio, including properties managed in our JV partnerships, to R17.4 billion. In the nine year period since listing on the JSE in November 2015, we have grown our portfolio by 83 properties and outperformed the SA Property Yield Index, or SAPY, by 150%.”

The South African portfolio continued to outperform, with rental income and net property operating income increasing by 10.8% and 12.0% respectively compared to the prior year. Average occupancy and rental rates increased by 2.4% and 8.2% respectively, with occupancy in the same-store portfolio of owned properties growing by 8 900m² year-on-year.

After a challenging FY24 in the UK, Stor-Age delivered an equally pleasing set of results for the period. Rental income increased by 6.8%, with average occupancy and rental rates up 4.3% and 2.4% year-on-year respectively. Occupancy in the owned portfolio increased by 3 300m² year-on-year and net property operating income was up 7.4% compared to the prior year.

Stor-Age has a long and successful track record of acquiring, developing and managing self storage properties in prime locations which have delivered high occupancy and rental rate growth. Over the past 12 months, the Company has opened 10 new properties across both markets. This included five new developments completed in JV partnerships (two in SA and three in the UK), four properties added to the third-party management platform in the UK and the acquisition of Extra Attic in South Africa in September 2024.

Comments Lucas, “We continue to work with our JV partners to assess future acquisition, development and redevelopment opportunities. These partnerships are a key focus for the Group as we seek to source additional capital and development opportunities to deliver mutually beneficial outcomes for both Stor-Age and our partners. We remain confident that the long-term return profile on invested capital through our JV partnerships will be value-accretive as new developments lease up to mature occupancy levels.”

The Company has remained focused on its third-party management offering. A total of 26 properties are operating on this platform, 18 of which are in the UK. During the period, Stor-Age entered into a third-party management agreement with Hines to manage their acquisition of a self storage portfolio of three properties in the UK. Hines is a privately owned global real estate investment manager who own and operate US$93 billion of assets across property types and on behalf of a diverse group of institutional and private wealth clients. Stor-Age continues to work closely with Hines as they seek to deploy capital and build scale in the self storage market.

The Company’s loan-to-value ratio was 31.3% at period end, with 81.2% of net debt subject to interest rate hedging. In April 2024, Stor-Age raised R500 million in a debt auction allowing the Group to increase funding capacity, extend maturities and diversify funding sources. Noted Lucas, “While Stor-Age continues to benefit from a conservatively managed and interest rate hedged balance sheet, we do need to acknowledge the negative impact of the higher interest rate environment. While we have seen the first rate cut in South Africa and we saw a second rate cut last week in the UK, the cost of debt funding remains high. At an EBITDA level, we delivered attractive year-on-year growth of 7.9%, or R32.2 million, however net finance costs were up 21.8%, meaning that the R22.1 million increase in net finance costs effectively diminished our distributable income performance.”

Stor-Age has also continued its focus on environmental sustainability, further expanding its solar PV roll-out strategy across the South African and UK portfolios. To date, the Company has invested R72 million into renewable energy, generating over 7.7 million kWh of solar power. Currently, 60% of the portfolio has solar capacity installed.

Concluded Lucas, “We are well positioned from a strategic, financial and operational perspective as we approach the second half of FY25. We expect our South African portfolio to continue its positive growth trajectory for the remainder of the financial year, and we remain cautiously optimistic that our UK portfolio will deliver a robust set of results for the full financial year. Although competitive move-in pricing dynamics remain prevalent in the UK market, we are satisfied with our operating performance to date and remain confident in our ability to navigate the challenges that lie ahead.”

Stor-Age reaffirmed its FY25 full year forecast of distributable income per share to be between 122 to 126 cents.

The share closed on Friday at R14.95.

Key highlights for the period:

  • Earnings and total returns: Distributable income per share up 3.5% to 63.51 cents, with an interim dividend declared of 57.16 cents per share (90% payout ratio) and a total return of 10.91%¹
  • Financial performance: Same-store net property operating income up 9.6%, occupancy up 12 200m² and net investment property value up 5.4% to R11.5 billion
  • Portfolio growth: Added 10 properties, with the portfolio including the pipeline and ongoing developments now exceeding 680 000m². The growth includes five new developments, four third-party managed properties in the UK and the acquisition of Extra Attic in SA in September 2024
  • Strategic partnerships: Entered third-party management agreement with Hines in May 2024. Total of 26 properties now under third-party management
  • Balance sheet management: Successful debt auction raised R500 million below price guidance in April 2024, with a loan-to-value ratio of 31.3% and 81.2% of net debt subject to interest rate hedging
  • Environmental sustainability: Expanded solar PV roll-out, investing an additional R8.5 million during the period, with 60% of the portfolio now fitted with solar
  • Future outlook: Remain confident in business model’s resilience, reaffirming FY25 full-year forecast of distributable income per share of 122 to 126 cents

¹ 12-month dividend per share plus the increase in SA REIT net asset value (NAV) per share (for the 12-month period) as a percentage of SA REIT NAV at the start of the 12-month period

 

South African REITs Sustainability Disclosure Guide launched

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The South African Real Estate Investment Trust Association (SA REIT) Association in partnership with Nedbank Corporate and Investment Banking (CIB) have launched the SAREIT Sustainability Disclosure Guide, aimed at establishing sustainability standards and best practice benchmarks for the real estate sector in South Africa.

This guide is a valuable resource for SA REIT members and property organisations starting their sustainability reporting. It provides key information to improve their reports and outlines a framework of recommendations for sustainability and climate-related disclosures, aligning with international standards in the South African property sector and the global sustainability landscape.

Joanne Solomon, Chief Executive Officer of SA REIT Association comments:

“As industry partners, we are proud to launch the inaugural SA REIT Sustainability Disclosure Guide, marking a significant advancement in fostering a unified approach to sustainability within the South African real estate sector.

The property sector plays a crucial role in tackling environmental, social, and governance (ESG) challenges. Our goal is to guide the industry toward a future where sustainable practices are seamlessly integrated into business strategies, enhancing both resilience and value.”

Sustainability has become a key priority for businesses, with capital markets increasingly evaluating performance based on ESG metrics in their investment decisions. This trend is supported by compelling evidence linking strong ESG performance to an organisation’s ability to secure long-term competitive and financial advantages.

Furthermore, sustainability reporting offers investors valuable insights into a company’s long-term viability, risk management, and growth potential. This transparency empowers investors to make informed decisions that align with their values and financial goals.

“Meaningful sustainability disclosure is essential for attracting financial capital, enhancing accountability, improving business performance, and fostering a resilient property sector.”

The guide aims to enhance the reliability, consistency, and comparability of ESG data among South African REITs, promoting objectivity, facilitating analysis, improving valuations, supporting benchmarking, and encouraging cross-organisational comparisons, said Solomon.

Gary Garrett, Managing Executive of Property Finance: Nedbank CIB commented:

“As a purpose led organisation, we aspire to be a key participant in promoting a more sustainable future for the real estate sector. We are intentional about sustainability and about contributing positively to the communities in which we operate.”

The SA REIT Sustainability Disclosure Guide highlights the significance of accurate and reliable ESG reporting, aligning with global best practices and standards. These include the Global Reporting Initiative, the Sustainability Accounting Standards Board, and the Task Force on Climate-related Financial Disclosures.

Garrett said the practices outlined in the guide foster transparency, enhance stakeholder trust, and promote sustainable growth in the property market.

Solomon said the guide aligns with the voluntary JSE Sustainability and Climate Change Disclosure Guidance of 2022 and global best practices, specifically for the South African property sector. SA REIT recommends using this guide alongside the JSE guidance which serves as its foundation.

Many recommendations in these frameworks are not industry-specific and often overlook the unique challenges faced by property owners in South Africa. For instance, an international decarbonisation disclosure framework may not account for local municipality restrictions on electricity wheeling or the lengthy process of obtaining water-use licenses.

“This guide will assist issuers and investors in the South African property sector by standardising key sustainability concepts and their reporting. While it serves as a valuable voluntary tool, its application is not mandatory,” she added.

Download the SAREIT Sustainability Disclosure Guide here or email info@sareit.co.za for more information.

Redefine unveils newly expanded Pan Africa Mall

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Redefine Properties unveils newly expanded Pan Africa Mall

 Johannesburg, November 2024 – Redefine Properties, South Africa’s listed real estate investment trust (REIT), has officially opened the newly expanded Pan Africa Mall. The expansion added 9,000sqm of additional retail space, increasing the mall’s total gross lettable area (GLA) to over 25,000sqm. The mall is co-owned by Redefine Properties and Talis Property Fund.

Pan Africa Mall, located in Alexandra, underwent a significant upgrade, offering a wider range of stores and restaurants for the community. The centre now features a new upper-level floor for fashion retailers, including the relocated Mr Price and Ackermans stores, and an extended ground floor, which includes a new Roots Butchery, an expanded Truworths, and an FNB branch. Notable new tenants include W.Edit, Sportscene, Pick n Pay Clothing, Jam Clothing, Hungry Lion, Vision Works, The HUB, Selfast, Nizams, Clothing Junction, and Tekkie Town.

Andrew König, Chief Executive Officer at Redefine, says, “The expansion of Pan Africa Mall is a major milestone for both Redefine and the Alexandra community. By creating opportunities for local businesses and investing in sustainable solutions like solar power, we are contributing to the area’s economic growth while ensuring the centre serves the community for years to come.” The new expansion reflects Redefine’s vision to enhance the retail experience and collaborate with the Alexandra community towards collective growth.

Pan Africa Mall’s environmental, social, and governance (ESG) credentials will be improved as the upgrade incorporates full back-up power and water – including the exploration of sinking a borehole, a R12.2 million solar photovoltaic (PV) system with an 851kWp capacity, and the installation of energy-efficient lighting and water efficient toilets. Including these ESG measures into the centre’s operations is vital to Redefine’s commitment to sustainability, enhancing customer loyalty, and future-proofing the shopping area, helping the community it serves.

Tebogo Mogashoa, Chairman of Talis Property Fund, adds, “As investors deeply committed to Alexandra, Talis Property Fund sees this expansion as more than just retail growth – it’s an investment in the social fabric and economic future of the area.

“We have seen how the Pan Africa Mall has evolved into a welcoming space that fosters strong community connections, where families, small businesses, and social partners come together. Building on a foundation of trust, our partnerships remain instrumental in creating lasting value, reflecting the strength of collaboration in stimulating local economic development.

“We’re grateful to our social partners who have played a central role in helping us realise this vision.”

In a pioneering initiative, the centre was the first of its kind in South Africa built with fully integrated public transport, which includes a 50,000sqm taxi facility. Street hawkers are now being offered permanent stalls – managed by the Alexandra Taxi Association. Redefine is committed to growing smaller businesses and improving the area for customers.

“This project is about more than just expanding a shopping centre. It is about empowering local businesses and driving urban renewal in Alexandra. Redefine is committed to creating lasting value for the community and shaping a sustainable future for South African cities,” König concludes.

Growthpoint unveils second phase at Arterial Industrial Estate 

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Growthpoint unveils second development phase for Cape Town’s Arterial Industrial Estate 

85% of the first phase is already let with keen demand for this prime location

Construction of the new Arterial Industrial Estate in Cape Town is steaming ahead, with Growthpoint Properties (JSE: GRT) having moved into phase two of the world-class development.

Arterial Industrial Estate is a development by Growthpoint on a 71,656sqm site in the heart of Blackheath, a growing and modernising industrial node in Cape Town.

After phenomenal success with phase one, during which national and international tenants snapped up 85% of available space, Growthpoint has launched phase two of the Arterial Industrial Estate development.

Growthpoint’s decision is in response to growing demand for space — as seen in four out of five industrial units released in the first phase of the new development, which commenced construction in July 2023 and was completed in April 2024, already being taken up by tenants. Only a single unit of 3,503sqm, perfect for light industrial businesses, remains in the phase.

The first phase of Arterial Industrial Estate spans 19,741sqm, originally featuring six warehouse units, each with a two-storey office block. Jotun, a leading decorative paints and coatings manufacturer, was among the first to secure space at Arterial Industrial Estate, opting to combine two units for its new and larger head office premises of 5,713sqm. Other tenants with facilities at Arterial Industrial Estate include well-known logistics companies Nexus Fulfilment and RTT, as well as leading tyre distributor ATT Auto Truck & Tyres.

Growthpoint has started phase two of construction, which will add 21,840sqm of lettable space, more than doubling the size of Arterial Industrial Estate. This second phase will add a further six warehouse units, ranging from 2,945sqm to 5,713sqm, enhancing the estate’s capacity to cater to diverse business needs. Arterial Industrial Estate Phase Two will be ready for occupation from March 2025.

Timothy Irvine, Growthpoint’s National Client Experience and Western Cape Asset Manager, says the new phase of the development is already seeing great interest from potential tenants. “The demand for space at Arterial Industrial Estate is unsurprising, considering the development’s central and attractive location and the steady demand for industrial space currently being experienced in Cape Town.”

Arterial Industrial Estate is close to Cape Town International Airport, public transport nodes, and arterial routes important for South Africa’s economic activity. The estate is close to the R300, N1, and N2, with prominent visibility along the Stellenbosch Arterial Road highlighting its effortless link to the winelands.

Irvine says Arterial Industrial Estate’s proximity to arterial roads, and the country’s air and sea ports network, makes it a sought-after physical address in Cape Town. “Businesses situated at this prime location can efficiently connect with both local and global markets.”

Growthpoint’s experience in logistics and industrial property investment and development enhances the experience for existing and would-be tenants at Arterial Industrial Estate. The estate boasts 24-hour security and access control, flexibly sized warehouse and office space, and measures for efficient water and energy use. Phase one of the Arterial Industrial Estate has seen the installation of solar panels, which is set to help tenants secure sustainable energy.

The estate has achieved a 4-Star Green Star certification in the industrial property category from the Green Building Council of South Africa. This is aligned with Growthpoint’s goal of making its vast portfolio of properties environmentally sustainable. Growthpoint’s climate commitment target is being carbon neutral by 2050. Its sustainable business practices help tenant businesses towards their own ESG goals and support long-term cost savings for its clients. 

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