Dipula Income Fund has yet to reach its distribution decision for the end of February 2021.
In the company’s financial results for the year ended on the 31st of August 2020, the company advised shareholders that it had deferred a distribution decision until no later than the end of February 2021, a deadline that meets the JSE’s minimum requirements applicable to REITs.
Dipula’s board are required to assess the company’s solvency and liquidity position in relation to any distribution and the board considers the company to be in a ‘robust financial position with a loan-to-value (LTV) ratio (as of the 31st of December 2020) of 37.8% (38.9% as of the 31st of August 2019) which ‘sits comfortably within its group covenant level of 45%’.
The board believe that Dipula’s short-term liquidity position may be adversely impacted by prevailing circumstances during Covid-19 which include the national lockdowns and trading restrictions which could adversely impact rental collections and the refinancing of debt in a tightening credit environment with debt providers requiring deleveraging in the short-term as conditions to renewing facilities.
Citing these ‘uncertain conditions’, the board was not able to reasonably conclude a distribution decision (as required in terms of the Companies Act 2008) after completing a cash distribution that would meet the applicable minimum requirements for the FY2020 period.
According to the SENS announcement, Dipula is not required (under applicable regulations) to make any distribution to comply with its obligations as a REIT.
‘This decision does not represent any decision to reconsider Dipula’s status as a REIT nor does it preclude the board from considering this in the coming months, irrespective of a qualifying distribution for income tax purposes in respect of FY2020’.
‘Dipula is actively addressing prevailing uncertainties relating to its short-term liquidity position. Retention of distributable earnings is consistent with this strategy and positions Dipula to undertake further initiatives to enhance its defensive property portfolio and retain its tenant base, including funding refurbishments and redevelopments’.
‘Dipula continues to pursue strategies that, if resolved upon and implemented, may have a material impact on the price of the Company’s shares. While it is premature to announce any details of the matters under consideration, Dipula advises shareholders to exercise caution when dealing in the company’s shares.’