Indluplace’s improved portfolio diversification leads to revenue growth

Carel de Wit, CEO of Indluplace Properties Limited.
Carel de Wit, CEO of Indluplace Properties.

Indluplace Properties Limited has released its financial results for the year ended 30th of September 2018. The group reported a dividend of 49.19 cents per share for the six months ended September, bringing the total dividend for the year to 97.75 cents per share, in line with the prior year.

Indluplace bedded down its R4.3 billion expanded property investment portfolio during the reporting period, following the acquisition of a R1.4 billion portfolio from the Buffet Group. As a result of the transaction, the portfolio currently comprises of 9 788 units across 176 properties which are spread across provinces and unit categories, making the company a well-diversified and defensive property portfolio.

CEO Carel de Wit comments:

“Notwithstanding a strenuous macroeconomic environment, we have benefited from the acquisitions of the Diluculo and Buffet portfolios in terms of revenue generation. Our expanded portfolio provides diversity in terms of location as well as mix of unit sizes and unit types that cater for the residential rental segment, which is expected to continue growing in the long term.”

 Indluplace has grown its portfolio by an impressive 265% since listing in 2015, and the group has secured a significant presence in the affordable end of the residential rental market. The acquisitions included in this year’s results led to a higher loan-to-value ratio of 30.1% through R1.5 billion in facilities secured from ABSA, Investec and Standard Bank.

Financial Director of Indluplace, Terry Kaplan explains:

The LTV remains well within reasonable levels following the latest acquisitions. Having bedded down the new properties, we will now focus on delivering sustainable dividends, disposing of non-core and non-performing assets as well as reconsidering our exposure to bulk leases in favour of single lease agreements. There will also be a continued strong focus on tenant retention, in order to secure a lower vacancy rate over the medium term. We believe these measures will assist to mitigate risks and result in a more stable portfolio during the difficult period anticipated.”

By the end of 2018’s financial year, vacancies have increased to 8.4% which are heavily impacted by a single property, Highveld View, for which a number of bulk lease agreements covering 450 units were not renewed due to Eskom reducing its activity levels around Witbank. Excluding this particular property, the vacancy rate for the residential portfolio was 5.2% compared to 3.5% a year ago, reflecting a deteriorating economic environment.

“Whilst the recent acquisitions contribute positively to revenue generation, economic uncertainty and affordability pressures will continue to weigh heavily on consumers and investor returns are expected to be constrained in the short term. However, we remain confident that the actions put in place to improve vacancies and optimise the portfolio will reinforce our defensive positioning and align us further with the market demand for well-priced, quality accommodation in the inner city and suburban areas,” concluded de Wit.