Izak Petersen
Dipula Properties (formerly Dipula Income Fund)
CEO
As South Africa’s commercial property sector faces persistent macroeconomic headwinds, Dipula Properties (JSE: DIB) is charting a different course—one that delivers results and reshapes the narrative about where growth is found. Marking its 20th anniversary and reporting robust interim results for the six months ended 29 February 2025, the black-managed REIT is doubling down on underserved rural and township markets, a strategy CEO Izak Petersen credits for the company’s resilience and momentum. The Dipula portfolio includes 161 retail, office, industrial and residential properties across South Africa, predominantly in Gauteng.
Defensive portfolio, strong performance
Dipula’s property portfolio increased in value by 5% to R10.3 billion, supporting a 6% rise in net asset value. Distributable earnings per share (DPS) climbed 4.2% to 52.7 cents for the half-year—squarely within the full-year guidance of 4% to 6%. “Dipula’s operational performance reflects solid delivery and a strongly defensive position in persistently challenging conditions,” Petersen said. “We continue to demonstrate that our strategy is working, even as we navigate higher prevailing interest rates and increased hedging costs.”
Revenue for the six months was R760 million, consistent with the prior period. Net property income increased by 3% to R465 million, despite a 6% rise in property-related expenses—primarily due to municipal tariff hikes. The cost-to-income ratio rose to 43.5% (FY24: 42.6%), while administrative costs were maintained at a tight 4% of income.
Retail centres in townships, rural, and urban convenience locations now contribute 67% of portfolio income, making Dipula one of the few listed funds to heavily back these markets. “We’ve always focused on non-discretionary, community-based retail,” Petersen said during a recent media briefing. “But the growth we’re now seeing in rural and township nodes is surpassing expectations—these areas are not just underserved, they’re full of untapped economic vitality.”
The power of underserved demand
While much of the commercial property industry has been preoccupied with urban megamalls and high-spec logistics, Dipula has quietly built a network of decentralised, community-oriented shopping centres ranging from 10,000 to 25,000 square metres. “There’s a surprising level of spend in these markets,” Petersen noted. “Even in the face of interest rate hikes and inflation, we’re seeing consistent footfall and tenant growth.”
Retail vacancies remained steady at 6%, and new and renewed leases worth R309 million were concluded during the reporting period. Financial institutions, discount retailers, and furniture outlets are adapting to these markets, often with smaller, bespoke store formats. “Some of the major banks are reopening branches in areas they had exited a few years ago,” Petersen said. “It’s a reflection of where the customers actually are.”
Innovation and asset management
Dipula’s approach is hands-on. Rather than simply collecting rent, the company actively manages and upgrades its centres, investing R117 million in refurbishments and redevelopments this period, nearly R70 million of which went into income-generating projects, including solar PV installations. “We don’t just sit back and collect rent,” Petersen explained. “We put lipstick on the centres. We get involved. We speak to retailers almost daily.”
This proactive strategy has paid off. Overall portfolio vacancies dropped from 8% to 7%. Lease renewal rates remain strong, with a weighted average positive renewal rental rate across the portfolio: 8.3% for offices, 6.2% for industrial, and 2.4% for retail. Tenant retention stood at 79%, slightly lower than previous periods due to Dipula’s focus on higher-quality tenants, particularly in the industrial mini-unit segment, which typically experiences high turnover. Despite this, industrial vacancies fell to just 4%, and this segment accounts for 13% of Dipula’s rental income.
Disposals of non-core assets—R125 million during the half, at a 4% premium to book—are freeing up capital for reinvestment in value-accretive developments, many of which are outside traditional urban strongholds. While no acquisitions were completed during the half-year, Dipula maintains a strategic pipeline of growth opportunities.
Unlocking the hidden economy
Petersen is quick to point out that much of the economic activity in these communities remains off the official radar. “You drive through some of these areas, and the level of development is remarkable,” he said. “What used to be a single-room structure is now a four-bedroom house with multiple rental units behind it. Backyard dwellings rent for R3,000 to R6,000 per unit—comparable to formal urban rentals, but this income is off the books.”
For Dipula, understanding this “hidden economy” is critical. “Traditional models of demand forecasting and creditworthiness don’t capture this activity. You have to be on the ground to really understand it. You need the local context, the relationships, the data that doesn’t come from a spreadsheet.”
Strategic shift, not a side bet
Dipula’s rural and township focus isn’t a side bet; it’s the core strategy. The company has telegraphed its intention to exit the residential rental market, which currently represents 4% of income, to reallocate capital to retail and industrial sectors. Office holdings, now 16% of income, are being streamlined as vacancies improved to 19%, down from 23% a year ago. However, the market remains oversupplied.
Industrial plays are tailored to the context, focusing on small-format, last-mile logistics and light manufacturing facilities that support local economies. “We’re not competing with the likes of Equites or Fortress in the big-box logistics space,” Petersen explained. “Our assets are in the 5,000 to 25,000 square metre range. They’re close to the customer and adaptable to changing needs.”
Sustainability and balance sheet strength
Dipula’s installed solar capacity will more than double to 16 MW this year, as part of a broader effort to future-proof the portfolio. Gearing remains prudent at 36.3%, with R400 million in undrawn facilities providing additional liquidity. The interest cover ratio is steady at 2.8 times, reflecting a consistently well-managed balance sheet.
“We’re not overgeared. Our LTV is around 36%, and we have room to move if the right opportunities arise. But we’re cautious. It’s not the time to chase deals. It’s time to consolidate, manage costs, and invest in areas that show real demand.”
Looking ahead
Petersen remains optimistic despite a tough macroeconomic outlook—sticky inflation, high interest rates, and global uncertainty. “These markets have been overlooked for too long. But the data—and more importantly, the people—tell a different story. There’s growth here. There’s resilience. And there’s value to be unlocked.”
As Dipula marks two decades of delivery, its rural and township strategy is driving results and redefining what’s possible in South Africa’s property landscape.