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Archives for May 2025

Octodec successfully navigates the recovering economy

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Octodec successfully navigates the recovering economy, delivering growth in both rental income and distributions for HY2025

  • Revenue grew 2% to R1.1 billion
  • Core vacancies reduced to 7% with all sectors contributing to the improvement
  • Cash generated from operations up 25% to R270 million
  • Distribution per share 3% higher at 62.00 cents
  • Executed the sale of ten properties aligned with the portfolio recycling strategy
  • Yield-enhancing solar projects rolled out at two key assets
  • Pilot project Yethu City launched to high market demand with residential units 97% let

JSE-listed REIT Octodec Investments Limited, announced its interim results for the six months ended 28 February 2025, reporting a resilient performance across its Gauteng-based portfolio, despite a challenging market context.

Building on early signs of economic recovery, Octodec management focused on soundly managing the portfolio and the Group’s value proposition, reducing vacancies and disposing of ten non-core assets.

A highlight for the period was the completion of and successful launch of Yethu City in mid-February 2025. This redevelopment pilot project exemplifies Octodec’s ability to address market needs by introducing quality, accessible co- living accommodation to the Pretoria CBD. The letting rate exceeded expectations, with the residential occupancy reaching 40.7% by end February 2025 and currently nearing 100%.

Commenting on the results, Jeffrey Wapnick, Octodec MD says “We are pleased to have grown our rental income and dividend despite a challenging operating environment, reflecting the stability of our portfolio and the effectiveness of our strategic initiatives. We remain committed to managing our portfolio in alignment with market demand, while supporting long-term sustainability and driving value creation. We are thrilled about the successful launch of Yethu City as part of our efforts to provide well-priced, quality accommodation and unlock new opportunities for growth and enhancement of returns.”

Portfolio performance

The overall portfolio valued at R11.3 billion, delivered revenue growth of 5.2% at R1.1 billion, and a reduction in core vacancies to 13.7%, largely driven by improved performances from the Shopping Centre and Office portfolios.

Octodec’s portfolio of retail shopping centres, anchored by a strong base of convenience centres, recorded core vacancies of 0.8%, when excluding Killarney Mall which is held for sale. The portfolio achieved solid rental income growth of 6.2% to R91 million, reflecting management’s yield-enhancing actions, and robust demand for this retail category.

Rental income from retail street shops rose by 1.4% on a like-for-like basis while the strategic disposal of properties with high vacancies supported an improvement in occupancy from 86.0% to 87.4%. The Group acknowledges the impact of macroeconomic challenges and infrastructure constraints on this retail segment – most notably the Lilian Ngoyi Street that is currently under repair in the Johannesburg CBD, which contributed to elevated core vacancies of 21.9% at these affected properties.

Octodec’s office portfolio performance showed some green shoots, recording encouraging like-for-like rental income growth of 6.4% to R151 million, when excluding a net lease adjustment applied in the comparative period. Core vacancies improved slightly from 24.3% to 23.4%. Management continues to proactively manage underperforming assets through disposals and strategic conversions.

Octodec’s residential portfolio recorded above-inflation rental income growth of 5.1% on a like-for-like basis. Vacancies ended slightly above the comparative period at 8.4%, however were below the FY24 figure of 9.2%.

The Hatfield properties benefitted from pre-approval of NSFAS funded students and the enhanced amenities for students, recording a notable decline in vacancies of 3.1 percentage points. The introduction of the Yethu City co-living offering, aims to address affordability constraints and capture the vast demand for quality accommodation in this market.

The industrial portfolio consisting of smaller warehouses and light industry performed well, delivering rental income growth of 5.1% on a like-for-like basis and reduced vacancies of 8.7%.

Disposals and Capital Investment

In line with its strategy to exit non-core properties and redeploy the capital more advantageously, Octodec sold ten non- core properties at a weighted average exit yield of 8.4%, receiving R49 million in net proceeds. Several capital investment projects were undertaken during the period, most notably the installation of solar panels at The Fields and The Park Shopping Centre, which is expected to yield significant returns and enhance both the value and appeal of the properties. Smaller value-enhancing projects included the upgrade of Waverley Plaza, improvements at government- tenanted Rentmeester Park and at the historic landmark building, Bank Towers, where Octodec welcomed a new look Jet store.

Prudent financial management

 Cash generated from operations (before dividends) was 25% higher at R270 million. The group’s total borrowings ended the period at R4.4 billion and the LTV was reduced to 38.5%. Effective 30 November 2024, R970 million in funding was refinanced at improved margins with tenors of three to four years. The weighted average cost of funding ended the period slightly higher at 9.4% as a result of expired interest rate swaps. Management is proactively negotiating the refinancing of a further R650 million of debt maturing end August 2025. At the end of the reporting period, borrowings were 51% hedged and within the Group’s hedging target of between 50% to 60% in the short to medium term. The Group ended the period with R692 million in cash and unutilised banking facilities which is sufficient for its capital commitments.

Outlook and prospects

The formation of the Government of National Unity (GNU) has lifted market sentiment and together with interest rate cuts has improved the operating backdrop. These developments have already supported disposal activity and offered relief to small businesses, while presenting opportunities to lower Octodec’s funding costs, improving the potential for value-accretive reinvestment. While the lingering effects of the Lilian Ngoyi Street gas explosion and persistent unemployment continue to weigh on parts of the portfolio, management remains focused on tenant support, claim recovery, and adaptive asset management. However, heightened geopolitical risks, a material government lease termination, and uncertainty tied to the sustainability of the GNU, have prompted a more cautious outlook.

Riaan Erasmus Deputy CEO and FD adds, “We remain cautious in our interest rate outlook and focused on maintaining a disciplined balance sheet. As previously communicated, the Board has mandated a more assertive disposal strategy for non-core assets, where sales proceeds will be recycled into yield-enhancing investments or used to reduce borrowings, ultimately supporting income growth and strengthening the Group’s financial position. The early success of Yethu City underscores our strategy to reimagine underutilised assets to drive future returns.”

Based on the economic outlook and caution surrounding geopolitical tensions, management has revised its guidance for growth in distributable income per share, to between 2% and 4%, while maintaining a minimum dividend pay-out ratio of 75% of distributable income.

Fairvest Launches Rosebank Quarter

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Fairvest Launches Rosebank Quarter After R30 Million Transformation Project

JOHANNESBURG, South Africa, JSE-listed real estate investment trust Fairvest Limited has officially launched Rosebank Quarter, a newly refurbished mixed-use commercial property in the heart of Rosebank, the R30 million redevelopment was carried out over two years, aimed at bringing the building in line with the growing quality of the precinct.

The launch marks the culmination of months of construction and design work to reposition the asset as a vibrant commercial hub, offering a refreshed mix of office, retail and lifestyle offerings.

The property has undergone a significant upgrade, including a full exterior overhaul with contemporary cladding and integrated lighting that brings the structure to life after hours. Internally, the entrance has been fully redesigned and now features a scenic lift, while the building’s courtyards have been reworked with water features, new paving, planters and seating areas.

Retail elements have also been given attention, with new shopfronts installed throughout and external food stalls creating a more active, pedestrian-friendly interface. Office spaces inside the building have been refurbished to support modern working environments, while the basement now benefits from digital access control and number plate recognition technology.

Fairvest CEO Darren Wilder said the project reflects the company’s approach to enhancing assets in key urban locations.

“Rosebank Quarter is a strong example of how we reinvest into our portfolio to drive both tenant value and broader precinct upliftment. We’re not just refreshing buildings, we’re strengthening our position in key nodes like Rosebank, where demand for well-located, accessible commercial space continues to grow.”

The asset sits within the fast-evolving Rosebank district, an area that has seen continued growth in both commercial and residential development over the past five years. The redesign of Rosebank Quarter was aimed at meeting this growth with an offering that reflects both the expectations of today’s tenants and the energy of the surrounding neighbourhood.

Founder and Architect at Oblik Architecture and Design, Mary-Lee Nicoloudakis, who developed and oversaw the redesign, said the vision was to create a building that felt cohesive with its environment while offering a new level of finish.

“There was a strong emphasis on giving the building a renewed identity, one that felt authentic to Rosebank’s urban character, but with enough warmth and human scale to make it comfortable and inviting. The use of Art Deco cues, in a modernised way, allowed us to blend heritage and future.”

The building is already seeing strong leasing interest, supported by its upgraded amenities, ample parking and growing footfall in the area. A diverse tenant mix is expected to include cafés, food outlets, and boutique retailers, along with a base of small to mid-sized businesses occupying the office components.

In line with Fairvest’s broader environmental strategy, the company has begun early-stage solar installation on the building and is rolling out smart metering across larger electrical loads to better manage energy usage. These measures form part of its long-term ESG goals, particularly around reducing carbon emissions across its urban asset base.

Today’s launch was attended by project partners, stakeholders and current tenants, many of whom remained operational throughout the refurbishment process.

“The patience and support of our tenants during the construction period has been invaluable,” said Wilder. “It speaks to the strength of the community we’re building here, one that is invested in what Rosebank Quarter can become.”

 

Equites’ logistics portfolio delivers another strong performance

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EQUITES’ PRIME LOGISTICS PORTFOLIO DELIVERS ANOTHER STRONG PERFORMANCE

Highlights for the 2025 financial year include:

DPS of 133.92 cps, at the upper end of guidance
Distribution pay-out ratio of 100%
LTV reduced from 39.6% to 36.0%
R2.9 billion in cash and unutilised facilities
Disposals of R2.4 billion concluded and transferred during FY25
Signed six Power Purchase Agreements (“PPAs”) which will be revenue generating in FY26

Cape Town, 15 May 2025. Equites Property Fund Limited announced its results for the 2025 financial year today, showcasing strong performance from both the South African and United Kingdom portfolios. This success was bolstered by a significantly reduced loan-to-value (LTV) ratio and Equites’ achievement of securing the lowest credit spreads in the sector during FY25. This accomplishment was directly linked to the strength of Equites’ balance sheet and the quality of its underlying portfolio.

Equites CEO, Andrea Taverna-Turisan said: “With the focus on like-for-like (LFL) rental growth both in SA and the UK, limited vacancy during the period and the ability to generate revenue from renewable energy, the Group has delivered distribution per share of 133.92 cps, which is on the upper end of the previously provided guidance.”

 Equites is the only specialist logistics REIT listed on the JSE. From a returns perspective, the industrial sector remained the most favourable property sector in SA in 2024, with a total return of 13.2% for the calendar year according to MSCI. The low vacancy rate, high rental growth and overall sector outperformance are fuelled by intensifying demand from retailers and 3PLs. Limited supply due to a shortage of appropriately zoned and serviced land, along with prohibitive funding costs for many developers, has further constrained availability. The demand for ESG-compliant space remains a key theme driving demand, particularly among multi-national tenants.

The Group focuses on high-quality logistics properties, let to A-grade tenants on long-dated leases. Equites’ portfolio fundamentals are exceedingly robust. The R27.7 billion portfolio is 99.9% occupied, with a WALE of 14 years and strong escalation clauses. Global multi-nationals and large listed organisations form the backbone of the tenant portfolio.  These fundamentals support high-income certainty over a sustained period, bolstering property valuations.

Equites’ R21.1 billion South African portfolio is the cornerstone of the business and delivered LFL rental growth of 5.9%, valuation growth of 6.0%, a WALE of 14.1 years and no vacancy at year-end. The Group has disposed of several smaller, specialised, and non-ESG compliant assets over the last 24 months. The resultant portfolio provides high-income predictability and robust rental and capital growth opportunities aligned with Equites’ commitment to its sustainability objectives.

Equites’ UK portfolio delivered exceptional rental growth over the period, with three assets undergoing rent reviews, resulting in uplifts of between 19% and 69%. The valuations have remained reasonably flat with a 1.0% uplift in GBP terms. The UK portfolio has a WALE of 13.1 years with only a single ancillary unit, representing 1.5% of the UK portfolio, vacant at year-end.

 Capital allocation to maximise value

The Group acquired and developed 14 assets in the UK, with a cumulative development value exceeding £450 million. These assets reached a peak value of £550 million, reflecting the value created over the past nine years. However, as market conditions in the UK changed, the Group needed to reassess whether this capital allocation would yield the highest possible returns for shareholders.

Seven of these assets, along with the Newlands development platform, have already been sold, and the Board has now decided to explore the sale of the remaining UK portfolio. This decision was driven by the maturity of the existing assets and the opportunity to reinvest the proceeds in South Africa. The proceeds from the sales could significantly reduce the loan-to-value (LTV) ratio. Plans are in place to reinvest this capital into newly developed, ESG-compliant logistics facilities on long-term leases in South Africa, which will enhance shareholder value over the long term.

In South Africa, Equites successfully completed a 16,721m² facility at Jet Park in March 2024, let to SPAR Encore. The Jet Park precinct has proven to be a resounding success, and the Group expects to develop the remainder of the Jet Park land within 18 months.

Equites also completed R195 million of improvements to the Shoprite Centurion facility, as part of the existing lease expiring in 2044. Two other Shoprite facilities were completed, both with 20-year leases – the R1.2 billion development of an 80,531m2 facility at Wells Estate, Eastern Cape and a groundbreaking R1.3 billion campus in Riverfields, Gauteng.

Three speculative developments with a total GLA of 20,116m² were completed in FY25. Two of these facilities were let before the practical completion date, and the third was let within three months of completion, demonstrating the intensifying demand for high-quality logistics assets in prime nodes. Through the 48 hectares of strategically located land that Equites controls, its development expertise, and its relationships with key retailers, 3PLs, and FMCG players, Equites is strategically positioned to exploit the current supply gap and grow its portfolio of excellence in SA.

Equites CEO, Andrea Taverna-Turisan, said: “We are confident that strong structural drivers underpin the long-term demand for high-quality logistics assets. Our track record of developing world-class facilities and a prime logistics portfolio will continue to attract top-tier clients and promote sustainable value creation for shareholders over time.”

 Optimise the Group’s capital structure and reduce the cost of funding

The Group has reduced its LTV from 39.6% to 36.0%, despite R1.5 billion construction and development spending in FY25. The reduction was driven by R1.4 billion of assets sold in SA at a premium to book value of 1% and R1 billion of assets sold in the UK at a discount of 0.5%, reinforcing the validity of the Group’s property valuations. Successful dividend reinvestment options for the two dividends during the year also contributed to the lower LTV.

The asset disposals and other strategic initiatives ensure that the Group is well capitalised with a low exposure to market risks and is successfully positioned to take advantage of performance-enhancing development opportunities. Given the exciting prospects, the Group has R2.9 billion in cash and undrawn facilities, and sufficient funding to meet maturities without raising new debt. The lower LTV also presents the Group with an opportunity to repurchase its shares where value-enhancing.

Through refinancing debt in South Africa and careful interest rate risk management, the Group’s all-in cost of debt in South Africa decreased from 9.1% to 8.6%, with an average debt maturity of 3.8 years. The UK cost of debt has remained constant at 3.9%, with almost 90% of UK debt maturing in FY33. More than 83% of the debt is hedged against interest rate volatility.

Growing revenue streams from alternative sources while fulfilling our ESG aspirations

ESG is a key aspect of the Group’s strategic positioning and continues to be at the core of its operations. These efforts have been recognised through the Morningstar Sustainalytics ESG Regional top-rated and ESG Industry top-rated company awards, received for the second consecutive year.

In addition to extensive climate-conscious construction initiatives and water efficiency interventions, Equites has dedicated significant time and resources to ensuring its tenants are shielded from electricity-related disruptions due to load-shedding or failing infrastructure. At year-end, the total solar generation capacity in the portfolio was 26.7 MW, with over two-thirds of the portfolio being supplied with solar energy. An additional 4.2 MW of green energy will come online in 18-36 months at a forecasted capital expenditure of R78 million.

Over the last 24 months, the Group has started implementing Power Purchasing Agreements (PPAs) to sell renewable energy generated on Equites’ rooftops to tenants at a discount to prevailing tariffs. Thus far, the Group has entered into a wheeling agreement in the City of Cape Town and has six PPAs in place, and the intention is to grow this revenue component. The Group is looking to increase wheeling capacity through engagement with municipalities, given its capability to generate excess energy from large-scale installations on entire roof space, and capitalise on rates of return well in excess of typical property returns. The execution of these initiatives delivers direct value to tenants while reinforcing the Group’s commitment to its sustainability objectives, generating alternative revenue streams, and contributing to energy security in SA.

Prospects

The Board expects DPS to increase at a rate above inflation going forward, within a target range of 140.62 – 143.29 cents per share – reflecting growth of between 5% and 7%. The Board’s DPS guidance is premised on the strong tenant base, the completion of several large-scale developments at Riverfields, Wells Estate and Canelands in FY25, enhancing revenue in FY26, and the certainty of overheads.

Equites CEO, Andrea Taverna-Turisan, concluded: “Equites has made the strategic decision to invest in assets which offer both income certainty (through tenure) and annual escalation clauses, thereby organically underpinning distribution growth. LFL rental growth for FY25 amounted to 5.9%, a level at which the Group expects to see LFL growth stabilising. By effectively managing administrative costs and the cost of debt, the Group expects to deliver distribution growth consistently higher than South African consumer inflation over the long term.

Growthpoint completes Phase 2 of the Arterial Industrial Estate.

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Growthpoint’s Logistics Portfolio is Bolstered by Completion of Arterial Industrial Estate, Cape Town 

Growthpoint Properties (JSE: GRT) has reached another milestone in its ongoing strategy to improve the quality of its directly held South African portfolio with the completion of Phase 2 of the Arterial Industrial Estate in Cape Town.

Driving its domestic portfolio enhancement, Growthpoint has strategically grown its logistics and industrial assets from 15% to 20% of the total SA portfolio value in recent years.

At the same time, South Africa’s leading REIT (real estate investment trust) has increased its exposure to modern logistics warehouses, the backbone of Growthpoint’s long-term value creation approach in this sector. Modern logistics properties are and now represent approximately half of the portfolio’s gross lettable area. It is also focusing its investment in better performing, higher demand areas of the country, specifically in the Western Cape and KwaZulu-Natal.

A notable stride in this direction is the recent completion of Phase 2 of the Arterial Industrial Estate in Cape Town, adding quality capacity to the sought-after location. With 21,831sqm of additional lettable space, Phase 2 has added six more warehouse units, ranging from 2,945 square meters to 5,713 square meters, catering to a variety of business needs. Together, both phases of the development represents a nearly R400 million investment from Growthpoint.

The estate is experiencing strong demand, with two of the six units in Phase 2 already snapped up supported by strong tenant interest, highlighting the need for high-quality industrial space in the region. Phase 1 of Arterial Industrial Estate, spanning 19,741 square meters is fully let to top names in national and international industry.

“The completion of Arterial Industrial Estate’s Phase 2, and the good demand and take-up of available space it is experiencing, underscores the value we provide to businesses seeking efficient and sustainable industrial real estate solutions,” says Wouter de Vos, Growthpoint’s Regional Head: Western Cape.

“Growthpoint is reporting strong performance in its logistics and industrial portfolio, fuelled by high occupancy rates and a strategic focus on modern facilities. Our well-let logistics and industrial portfolio demonstrates the increasing demand for modern, strategically located facilities,” says Errol Taylor, Growthpoint’s Head of Asset Management, Logistics and Industrial Property.

Arterial Industrial Estate is strategically positioned in Blackheath, a popular industrial hub in Cape Town, offering exceptional access to key transportation routes, including the R300, N1, and N2 highways, as well as Cape Town International Airport and the region’s seaports. This prime location allows businesses to efficiently connect with both local and global markets.

The estate offers 24-hour security, flexible warehouse and office space, and a commitment to sustainability, including solar panels and a four-star Green Star certification from the Green Building Council of South Africa.

“This project reflects a continued and deliberate pivot toward better-performing, future-fit logistics assets and aligns with Growthpoint’s strategy of targeted investment and divestment, and development,” adds Taylor.

Emira’s beehives are a sweet investment in tomorrow

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This May, pinstripes are out and bee stripes are in. The United Nations has declared 20th of May World Bee Day, providing the perfect opportunity for Emira Property Fund to celebrate the success of its own tiniest, busiest VIP – Very Important Pollinator – tenants.

For the last five years, SA REIT Emira (JSE: EMI) has been quietly putting its weight behind an essential global commodity: bees. During that time, the fund’s littlest property investment has become one of its proudest, with 14 beehives at five of its properties, all abuzz with activity.

As Ulana van Biljon, Chief Operating Officer of Emira, explains, “The beehive project was chosen to highlight the decline of global bee populations, because bees and other pollinators are under serious threat, yet they contribute so much to society, as well as to the biodiversity of our properties. Our hives provide a safe place for honeybees to live and breed.”

According to the United Nations (www.un.org/en/observances/bee-day) over 75% of the world’s food crops – nutrient-dense fruit, vegetables, nuts and seeds – and 35% of global agricultural land depends on animal pollinators. The greatest of these are the 20,000 species of bees worldwide.

In 2020, Emira began installing beehives at eight of its properties in Gauteng and KwaZulu-Natal. Subsequently, three of the properties were sold, so currently Emira has 14 hives across five properties.

“Our bee conservation project is a holistic approach to reducing the impact of environmental degradation, which goes beyond planting trees,” says van Biljon.

The first Emira hives were installed at Knightsbridge office park in the heart of the Bryanston business node, and Hyde Park Lane, a tranquil corporate address in Sandton. These sites were selected, according to van Biljon, “due to their safe site location, the biodiversity of the surrounding landscape and the abundance of flowering plants which provide the nectar flow for the bees to produce honey.”

Both bee and human welfare concerns were carefully considered, she adds, noting that the public live in harmony with bees anyway: there are many natural swarms of bees throughout South African cities. Emira’s beehives are managed in a secure, controlled environment, away from areas of heavy foot traffic and clearly sign-posted, while beekeeping activities take place at night.

The results so far have been sweet: the busy little workers have produced 106kg of honey for the March 2025 harvest from four apiary sites, namely Knightsbridge (19kg), Hyde Park Lane (16kg), Wonderpark (53kg) and Albury Park (18kg). A by-product of the conservation initiative, the honey is harvested after the summer months when the bees produce a surplus.

However, no honey could be harvested from the two hives at One Highveld, as both underwent “absconding” at the same time – absconding being a normal phenomenon within honeybee hives, part of a cycle in which an old queen is replaced with a younger one. Any existing honey was then “stolen” by other honeybees, another natural turn of events.

The honey was shared among Emira staff and tenants, creating awareness of the importance of preserving biodiversity. To the delight of the recipients each harvest tasted unique as bees tend to collect nectar within 3km of their hive. This meant Johannesburg honey was crafted largely from exotic garden ornamentals like jasmine, lavender, rosemary and jacaranda trees. Meanwhile, in Pretoria North – where hives are situated at Wonderpark Shopping Centre – an abundance of indigenous plants, acacias, and grassland flowers created honey with darker, flavourful herbal tannins.

“This biodiversity is vital for healthy ecosystems, which support both human well-being and the economy,” says van Biljon. “Healthy ecosystems form the ecological infrastructure of the country, providing clean air and water, fertile soil and food.”

The bees must have realised they were on to a sweet rent-free deal at Emira: in April 2024, passing bees took up residence in a pylon at Boskruin Shopping Centre, not an ideal location. Once they were safely removed by a beekeeper, catch hives were installed to prevent more unplanned bee incursions. These will capture swarming honeybees, allowing them to be relocated to suitable sites within the Emira portfolio, or to commercial farms within the region. Thus, urban sites remain safe, and honeybee stocks are secured.

As part of Emira’s dedication to best environmental, social and governance (ESG) practices, it has also committed to a “No Net Future Loss” policy, conserving and promoting biodiversity across its portfolio and reducing the company’s impact on the environment.

“The country’s natural ecosystems are threatened by land use change, degradation and invasive alien species,” says van Biljon. “Climate change worsens these threats, but healthy ecosystems offer natural solutions that increase resilience. They protect communities from extreme weather events and enhance natural resources, livelihoods, food security and habitats for animals and plants.”

With the beehive project, Emira is putting the bee firmly into business, living up to its reputation as a truly diversified, balanced real estate investment trust.

Dipula reports strong interim results as it marks its 20th year

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Dipula Properties (JSE: DIB) has reported a strong set of interim results for the six months ended 29 February 2025, demonstrating continued strategic and operational momentum in a persistently challenging macroeconomic environment. The property portfolio increased in value by 5% to R10.3 billion, supporting a 6% rise in net asset value. Dipula’s distributable earnings per share (DPS) increased 4.2% for the half year, on track with full year guidance of 4.0% to 6.0%.

Dipula Properties (formerly Dipula Income Fund) is a prominent, diversified South Africa-focused REIT with a long-standing track record of sustainable value creation. As a black-managed property company celebrating two decades of operation this month, and nearly 15 of those as a listed entity, Dipula exemplifies a rare blend of resilience, transformation and consistent delivery that continues to contribute to the real estate sector and South Africa’s broader economic landscape.

The Dipula portfolio includes 161 retail, office, industrial and residential properties across South Africa, predominantly in Gauteng. The portfolio is defensively positioned with retail centres in townships, rural, and urban convenience locations contribute 67% of portfolio income.

Izak Petersen, CEO of Dipula Properties, comments, “Dipula’s operational performance reflects solid delivery and a strongly defensive position in persistently challenging conditions. However, we have felt the impact of higher prevailing interest rates and hedging costs relative to expiring hedge instruments. Encouragingly, we are seeing signs of recovery in the office sector and continued stability in our retail and industrial portfolios, with sustainability initiatives expected to support long-term performance.

Dipula’s revenue for the six months was similar to the prior period at R760 million. Net property income rose 3.0%, constrained by property related expenses, which grew 6.0%, mainly driven by municipal tariff increases. However, cost control remains a management priority, and the total cost-to-income ratio rose marginally to 43.5% (FY24: 42.6%), driven by improved recoveries and Dipula’s solar energy roll-out. The administrative cost-to-income was unchanged at 4%.

Operational highlights included significant leasing activity, contributing to a reduction in overall portfolio vacancies from 8% to 7% during the period. Dipula additionally achieved a weighted average positive renewal rental rate across the portfolio, underpinned by positive rates across the portfolio. The office portfolio recorded a renewal rate of 8.3% followed by industrial at 6.2% and retail at 2.4%. New and renewed leases concluded during the period amounted to R309 million, securing sustainable income streams.

Tenant retention of 79% is lower than in recent periods as Dipula has adopted stricter tenant criteria to improve tenant quality in its industrial portfolio, specifically for mini-units where there is high tenant turnover. Even with this change, Dipula’s industrial vacancies still decreased. Industrial and logistics assets deliver 13% of Dipula’s rental income and with a vacancy of just 4%, this segment remains stable and sought-after.

Dipula’s retail assets remain core to its performance, offering accessible and well-positioned spaces across diverse communities. The retail portfolio reported steady vacancies at 6%.

Offices comprise 16% of Dipula’s income, offering adaptable, well-situated workspace. The office vacancy rate ended the period at notably lower at 19%, down from 23% in the prior interim period, showing clearer signs of recovery starting. “The office improvement is refreshing, however there is still some way to go, and the Johannesburg office market remains oversupplied and highly competitive.”

Dipula has telegraphed to the market that it intends to sell its affordable and conveniently located residential rental units, which currently represent 4% of income. This is to re-allocate capital to the retail and industrial sectors that are core to its business. This portfolio showed a reduced vacancy rate from 10% to 9% over the six months.

Dipula continues to implement value-enhancing asset management strategies. It invested R117 million in refurbishments and redevelopments. Nearly R70 million of this was for income-generating projects, including solar PV, with the remainder allocated to defensive projects. A portion of the proceeds from R125 million in disposals, achieved at a 4% premium to book value, contributed to funding these projects together. While no acquisitions were completed during the period, Dipula has a strategic pipeline of growth opportunities.

“We’re firmly committed to future-proofing our portfolio,” says Petersen. “We are assessing some interesting opportunities which fall within our core focus, a few of which we hope to close in the short-term. Dipula’s installed solar capacity will more than double to approximately 16MW after the instillation of an additional 9MW of new solar projects to be rolled out during this calendar year.”

Dipula benefits from a strong balance sheet and has maintained prudent debt levels. Gearing was stable, at 36.3% compared to 36.1%, and a steady ICR of 2.8 times at the end of the period reflect a consistently well-managed balance sheet. R400 million in undrawn facilities provide additional liquidity.

Commenting of the operating environment in the second half of Dipula’s financial year, Petersen notes that global uncertainty has intensified amid shifting US trade policies and ongoing tariff disputes, which are expected to place upward pressure on inflation and interest rates. Domestically, South Africa faces persistent fiscal, economic and service delivery challenges, with subdued confidence and higher than anticipated interest rates.

“At Dipula, we remain focused on executing our strategic priorities: driving operational efficiency, optimising our tenant base and recycling capital to reinforce balance sheet resilience.” says Petersen.