The small property company taking on South Africa’s hidden R750 billion sector

Dipula is a small real estate investment trust (REIT) listed on the JSE that owns a portfolio consisting of defensive urban, township, and rural community retail centres.

It has been listed on the JSE’s main board since 17 August 2011, and currently trades on the exchnage with a market cap of just under R5 billion.

The REIT recently released its interim results for the six months ended 29 February 2025, which revealed strong results.

The company’s property portfolio increased in value by 5% to R10.3 billion, supporting a 6% rise in Dipula’s net asset value. 

Its distributable earnings per share increased 4.2% for the half year, on track with full-year guidance of 4.0% to 6.0%.

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’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, the company reported that cost control remains a management priority, and the total cost-to-income ratio rose marginally to 43.5%, compared to 42.6% in its 2024 financial year.

This was driven by improved recoveries and Dipula’s solar energy roll-out. The company’s administrative cost-to-income was unchanged at 4%.

Positively, th company also reproted a significant leasing activity during the period, having successfully concluded 77 new leases with a total GLA of 21,624 m², representing a total lease value of approximately R102 million. 

These new leases contributed to a reduction in Dipula’s overall portfolio vacancies from 8% to 7% during the period.

However, the company reported that 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 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, having reported steady vacancies at 6%. 

Benefiting from the informal market

With the release of its results, Dipula also announced that it intends to sell its residential rental units, which currently represent 4% of income. 

CEO Izak Petersen explained that this will allow Dipula to re-allocate capital to the retail and industrial sectors that are core to its business. He said the company has a strategic pipeline of growth opportunities.

Most of Dipula’s portfolio is located in Gauteng, and currently boasts 61 retail, office, industrial and residential properties.

However, the company outlined its intentions to reposition itself by selling these residential units and looking for more retail opportunities, ideally convenience, rural or township shopping centres in Gauteng.

“We’re firmly committed to future-proofing our portfolio. We are assessing some interesting opportunities which fall within our core focus, a few of which we hope to close in the short-term,” Petersen said.

In a media briefing following the release of Dipula’s interim results, Peterson said the company prefers to focus on non-discretionary retail, as that tends to perform better in underserved areas like townships.

He explained that the informal property market has significant opportunity, which is why many big retailers are looking to expand into those aread.

“Look at the performance of retailers in general, the ones that outperform are the ones servicing those markets – others are looking for formats that can expand into those markets,” he said.

For example, in September 2024, retail giant Shoprite, announced plans to double the number of Usave stores it has in the next five years to tap into the strong growth of the informal economy in South Africa.

Petersen said the opportunities are there, but Dipula will need to carefully pick what it buys. “We’re going where the retailers want to go,” he said.

He explained that the informal market is still undersupplied, but Dipula is specifically looking for undermanaged markets to add value through its asset management.

“We don’t quite appreciate how big the informal market is or how much economic activity there is,” he said. “There’s money there”

Informal economy expert GG Alcock estimates the value of this economy to be between R600 billion and R750 billion.

Issued on Daily Investor by Bianke Neethling | https://dailyinvestor.com/property/87809/the-small-property-company-taking-on-south-africas-hidden-r750-billion-sector/