JSE-listed fund’s rare release of small town property portfolio good news for investors

Mega South African retailers such as Shoprite, Pep Stores, First National Bank and Capitec Bank cannot all be wrong. At some point these brands all chose to expand their market share to small towns, townships and rural areas. Subsequently, they have reaped the benefits, faring significantly better than those retailers that decided not to do so.

Investing in retail, office and industrial properties in small towns have proven to be a golden recipe for achieving improved overall results, and an ideal solution for potential investors – especially at a time when businesses and individuals are likely to consider property as a more stable investment solution.

As the world and its markets are starting to feel the shock waves of the British voters’ decision to exit the European Union, South Africans also need to prepare to face Brexit’s far-reaching economic consequences, severe volatility in the markets and possibly a further slowdown in the economy.

“This makes it important for investors to set their sights on more steady and secure opportunities,”says Wayne van der Vent, co-founder of an online property trading portal Quoin Online. “Simple supply and demand economics for both retailers and property owners have made investments in secondary towns and townships worthwhile over the years. Primarily because these properties tend to be smaller, making them financially affordable, and historically tenants remain for longer periods, providing a steady income stream.”

While land costs, construction costs and fit-outs have been lower in rural areas compared to metropolitan towns, turnover for retailers and property owners have often matched those in metropolitan areas. “This means a lower capital investment at the same levels of turnover and thus improved income results, along with better overall returns – on condition that all the property fundamentals are adhered to,” explains Van der Vent.

This is why JSE-listed real estate investment trust, Dipula Income Fund’s decision to make a whole portfolio of 15 small- to medium-sized retail, office and industrial properties across SA available for acquisition, is good news for potential investors.

The Dipula Income Fund, specialising in long-term property investment in South Africa, has chosen to put the properties on the market through Quoin Online’s sales portal, opening them up to a much wider, national pool of buyers including private individual investors or small private syndications that are not reached through the traditional broker system.

“The online sales system, efficient for buyer and seller, makes it possible for the Dipula Income Fund to seamlessly manage multiple queries from brokers and investors,” says Karen Miller, director at Quoin Online. “It gives all interested and registered buyers easy access to due diligence information – whether they are in Cape Town, Johannesburg or Orkney!”

Most Dipula properties are situated in smaller towns and rural areas – from Secunda, Welkom, Klerksdorp, Vanderbijlpark and Krugersdorp, to Grahamstown, Humansdorp and Aliwal North. The properties, that have solid tenant contracts in place, are between 548m² and 7 570m².

It’s not the first time that Quoin Online facilitates the sale of a listed company’s properties. Its first client at the time of launching in 2014, was the JSE-listed Fountainhead Property Trust. Including 27 properties, this sale drew about 200 potential buyers to the portal over six weeks.

Whereas a property seller would normally have to email or hand deliver documentation and due diligence information, Quoin Online’s virtual data room provides access to all the necessary information in a streamlined process, saving sellers and buyers time and money. The system allows for a verifiable, audit-able trail of processes and offers, which is transparent and able to stand up to scrutiny – an important aspect of governance for such listed entities.

“It’s called paperless property trading and definitely the way of the future,” shares Van der Vent.“We still give Dipula all the rigour that is required in the sales process, but minus the headache of the manual paper trail associated with property sales.”

The 15 Dipula properties are situated across SA

In Gauteng where there is reportedly a high demand for rentals and landlords are making above-average returns, the Dipula properties are located in Krugersdorp (retail, 3 397m²); Germiston (one retail, 2 558m², one industrial, 3 678 m²); Vanderbijlpark (retail, 2 867m²); Benoni (retail, 595m²); Isando (retail, 1 824m²); Pretoria (retail, 2 024m²) and Vereeniging (industrial, 2 522m²). Absa Bank is currently the anchor tenant of the Krugersdorp property in Burger Street, situated just behind Main Road, which offers easy access to public transport and highways.

Secunda is one of the towns in Mpumalanga where it is said property finds an owner or tenant as soon as it enters the market, and new developments can look forward to a decent return on investment. Here the two Dipula properties are in walking distance of each other: a multi-level office building of 3 630m², previously tenanted by Old Mutual, boasting a large, secure underground parking area and linked to a paved area called Secunda Mall; and a two-story vacant retail property of 2 359m².

Absa Bank is the anchor tenant of the centrally-located 2 024m² retail building in Silverton, Pretoria, located opposite the Silver Mall Shopping Centre. The 7 570m² Welkom High Park Building is zoned for both retail and offices, while steel-framed shop fronts and windows provide natural lighting. Centrally located, the 1 317m² Klerksdorp property is a compact, double-story office building with ample street parking.

In the Eastern Cape it is reported that business had increasingly been investing in the retail sector in smaller towns, reducing the need for people to travel to the province’s main centres. Here the Dipula properties are: an 865m² retail space housed in a handsome edition of civic architecture on Church Square, Grahamstown; a 548m² single-story Standard Bank building in Humansdorp which entrance still sports its original wooden door with sash windows; and a neat 787m² retail outlet in the main retail node of Somerset Street in Aliwal North.