Dipula Properties (DIB) recently reported solid interim results, which should leave shareholders happy with their holdings.
Guidance for the full-year distributable earnings per share was upgraded as part of the outlook to a range of 7%-8%, which is roughly double the current inflation rate. So at a high level DIB is trading at a yield of about 7.7% and a skinny discount to NAV of about 3%.
Drilling down into its main assets, one of its star performers is its retail division. After multiple positive tailwinds for South African consumers towards the end of 2025 and into early 2026, it is no surprise that retail leasing performance is doing well. The vacancy rate dipped to 5.4%, an improvement of 0.8%. Tenant retention surged from 83% to 91% as it has a clear strategy to retain existing tenants.
The management notes the saying that it is cheaper and more profitable to retain an existing tenant than to bring in a new one. Rental escalations were at 5%, so perhaps some margin was given up here to reduce vacancy and improve retention. The management has been clear that retail is a focus area for growth capital when attractive opportunities present themselves.
Staying with the star performers, the industrial asset portfolio is primarily focused on the light industrial and logistics sectors with little to no manufacturing exposure, which is a blessing given the headwinds faced by many manufacturing businesses in South Africa at present. Rental escalation was higher here, at 7% but, again, when you enter the period with a vacancy rate of 3.9% and finish with one of 3.1%, there isn’t much floor space available for tenants to choose from.
The tenant retention rate skyrocketed from 55% to 85%, which was pleasing to see. The management once again highlighted that, much as in the retail division, this is a focus area for future growth capital.
Moving to the lesser lights: in the office portfolio, much as has been reported by various JSE-listed Reits sector companies, conditions remain challenging in the post-Covid period. While DIB and others have suggested the office sector in general is lifting itself off the canvas, it’s still a long way from being back fully on its feet.
The management notes the saying that it is cheaper and more profitable to retain an existing tenant than to bring in a new one.
The management notes the saying that it is cheaper and more profitable to retain an existing tenant than to bring in a new one
The vacancy rate increased to 23.2%, though the new and renewal leases agreed upon in the period brought about escalations of roughly 7%. It’s a whole lot better than the rental reversions we have seen from office leases across the sector in previous years. Total gross lettable areas were reduced by about 11%, and the number of physical buildings decreased from 31 to 27.
As you can imagine, no growth capital is being deployed here. DIB is looking to exit certain assets in accordance with its asset recycling programme and to reduce overall vacancy rates. For players yearning for a turnaround in the office sector, especially in Gauteng, the situation may seem much like that of Vladimir and Estragon eternally waiting for Godot in Samuel Beckett’s play.
Moving to DIB’s noncore division, its residential asset portfolio consists of four apartment complexes, which it is looking to offload. Much as with some of the deadweight in the office portfolio, it wants to sell these assets as part of its asset recycling strategy and create a more streamlined group profile. For the moment, with the residential sector representing only 4% of net income, and vacancy and rental revisions being reasonable, it is at least not a millstone around the broader group portfolio’s neck while divestment is sought.
One cannot leave a discussion about the DIB without a nod to the elephant in the room: listed competitor Fairvest is still sitting on the shareholder register as the largest shareholder at just over 21%.
When DIB CEO Izak Petersen spoke about interactions with Fairvest at the results briefing, he was coy, stating that the company engages with the Fairvest team as any business would with a large shareholder.
So while a potential takeover, merger or some other corporate transaction might occur here at some stage, an investor would also do well not to wait for Godot but rather base any investment in DIB on its own merits. DIB is trading under caution now, as it is “considering potential corporate activities”, which could mean that the elephant in the room is being addressed.
DIB continues to track along nicely, and its recent addition to the JSE Reit and property indices will hopefully put it in front of some more institutional managers and improve liquidity in the stock over time. Its gearing is modest, at 34%, which gives it sufficient flexibility to move on any attractive asset that may become available.
DIB has the bulk of its asset base in Gauteng, with a smattering of them in the other provinces. Thus any potential change in government at the municipal elections in November that can bring improved service delivery and confidence to the Gauteng economy would see DIB in prime position to benefit much like another Reit, Spear, has capitalised on the economic vibrancy of the Western Cape economy and marketed itself as a play on that theme.
Mark Tobin
