JSE-listed rental real estate investment trust Indluplace has reduced its residential vacancy rate to 8.5% and achieved an average vacancy rate of 10.7% for its portfolio for the financial year ended September 30, down from an average of 12.8% during the prior financial year.

The company increased its dividend by 13.6% for the year under review, and although its revenue declined by 2.9% to R583-million from R600-million in the prior financial year, it also reduced property operating costs to R315.8-million from R336.7-million in the prior financial year.

Further, the company has improved its loan-to-value ratio modestly to 38.45% during the financial year down from 38.56% in the previous year.

Additionally, owing to sustained improvement in occupancies in the second half of the year, the group was able to introduce minor rental increases towards the end of the financial year.

"At the end of the previous financial year, the board instructed us to start stabilising distributions, get through the Covid-19 impacted period and start to increase dividends and grow the company.

"Indluplace achieved most of the strategic objectives that the board set for the 2022 financial year. Sustainable value has been created in the property management business with the internalised property management capability operational for a full financial year," Indluplace CEO Carel de Wit said on November 23.

However, the student portfolio in Vanderbijlpark was subject to various negative factors as the universities transitioned away from head leases.

"Unfortunately, the student portfolio’s letting performance disappointed, but we have introduced various management improvements and are confident of a much-improved 2023," he said.

Meanwhile, Indluplace's internalised property management business, which it had taken over in September 2021, has been refining its systems and procedures to ensure they are robust and efficient. It is currently working well and has achieved leasing successes while the debtors book is looking healthy, said Indluplace COO Grant Harris.

"The new management team has learned a lot of lessons. We intend to build on this experience and successes and are looking forward to consistent numbers, or a slight improvement, in 2023," he noted.

The benefits of standardised systems and procedures, more direct influence on the team’s performance and a very experienced and motivated management team have already made a positive impact on performance.

"While stable collection rates and occupancy numbers indicate that our units are defensive in nature and are in demand by quality tenants, the performance of the portfolio is largely dependent on our tenant base growing and an improved economic environment," he added.

Further, Indluplace CFO Terry Kaplan highlighted that the company's bad debt had peaked during the Covid-19-impacted period and was currently back down to 1.8%, with the company aiming to further improve that number to 1%.

Indluplace owns a portfolio of 9 249 residential units and 15 549 m² of associated retail space, valued at about R3.4-billion. Its properties are situated mainly in Gauteng, and the group provides homes to almost 30 000 people.

"Our collection rates, financial position and debt facilities are all in a strong, stable position. We have consistently shown an ability to attract high numbers of new tenants.

"Although we have seen a gradual improvement in occupancies and our ability to pass modest rental escalations on to tenants, the environment is still unpredictable. Management will remain focused on ensuring that our properties and service to tenants enable us to retain and attract quality tenants and to ensure that the properties are managed as efficiently as possible," he said.

The group will focus on ensuring council accounts and increases are managed and the recovery of council expenses from tenants maximised.

"While we remain positive about our ability to grow distributions, ensuring improved occupancies in our student portfolio is critical. Due to the evolving and uncertain economic environment, we are not in a position to provide guidance on distribution per share for the next financial year," Kaplan noted.