Octodec, donated 500 Dignity Packs to Unchain Our Children

Octodec, sister company of City Property, donated 500 Dignity Packs to Unchain Our Children

Watching a crane at City Property Pretoria lowering 500 dignity packs for boys, girls, and women into Unchain Our Children’s trailer Tuesday morning, was watching many prayers being answered in front of our eyes. Top quality personal hygiene items, soft toys, sweeties, towels, and facecloths were among the carefully selected items were packed by the staff for distribution among abused children and survivors of gender-based violence.

As statistics are skyrocketing and cases of child abuse, neglect, abandonment, exploitation, and trafficking are being reported daily, Octodec dignity pack brings joy to these survivors as they realize someone is caring enough to have blessed them with a beautiful gift of something special just for them.

Wayne van Onselen, Founder and Executive Director Unchain Our Children was invited to meet with the Managing Director of Octodec, Mr Jeffrey Wapnick. Mr Wapnick has a quest for inner city revival and rejuvenation. His management team shared with us their Change Our City For Good campaign and every story was alive with passion, enthusiasm and dedication describing their projects focussing on the upliftment of the vulnerable in our society.

“Make it Happen”, is the motto of Mr Wapnick. We were privilege to have experienced not only his dynamic business demeanour but also his sincerity and dedication to give back to the community. An accomplished entrepreneur, his vision for mid-city make-overs exceeds all expectations.

With an impressive portfolio of commercial-, industrial-, retail-, office and apartment properties in Pretoria and Johannesburg, Octodec is celebrating more than 50 years of providing beautiful spaces for living life.

Octodec Announces 2022 Interim Results

Octodec’s digitalisation initiatives yield benefits as the Group broadens its residential offering and continues to pay down debt

The Group’s balance sheet optimisation and disposal strategies have also borne fruit in an improved half-year performance characterised by reduced vacancies and renewed tenant interest.

Highlights:

  • R944.4 million rental income (28 February 2021: R898.7 million)
  • Like-for-like rental growth 1.2% (28 February 2021: (8.5%))
  • Distributable income after tax (FFO) R211.8 million (28 February 2021: R199.1 million)
  • Distributable income per share 79.6 cents (28 February 2021: 74.8 cents)
  • Net asset value (NAV) per share R23.10 (31 August 2021: R23.20)
  • Cash generated from operating activities before dividend payment R193.9 million (28 February 2021: R184.3 million)
  • Loan to value (LTV) 41.0% (31 August 2021: 43.2%)
  • All-in annual weighted average cost of funding 8.3% (31 August 2021: 8.5%)

Tuesday, 10 May 2022 – JSE listed REIT Octodec Investments Limited, today announced its interim results for the six months ended 28 February 2022, against the backdrop of subdued market recovery. While the fourth wave of Covid-19 (November 2021-January 2022) was expected to further slowdown the local economy, only minor restrictions were placed on tenants’ businesses resulting in a limited impact on Octodec’s portfolio. Consequently, fewer rental discounts were granted to tenants over the period.

Revenue earned on a contractual basis after COVID-19 rental discounts increased by 5.1% to R944.4 million from R898.7 million. At the same time, property operating expenses increased by 5.2%, mainly due to increased administered costs such as assessment rates. The group’s bad debts remain under control at 1.9% of gross revenue compared to 2.5% for the prior period.

Speaking to various operational initiatives during the year, Jeffrey Wapnick, Managing Director of Octodec, says: “Octodec has managed to contain most property costs through hands-on management of the buildings, with a focus on maintenance management, ensuring that our buildings remain attractive to its tenants.”

Portfolio

Initiatives such as the introduction of shared and/or furnished accommodation at The Fields and value-added services such as Wi-Fi to tenants in various other buildings has contributed to the increase of Octodec’s residential income by 5.6% on a like-for-like basis. This, together with a focused marketing strategy to increase letting, has also resulted in reduced vacancies in our residential buildings.

Explaining actions taken to retain and attract tenants, Wapnick comments: “There is increased residential supply by competitors in Johannesburg CBD, which is why we are maintaining our competitive edge by providing quality apartments and services at affordable prices, which has been done without major CAPEX. Due to the positive outcome of the above initiatives, we intend to roll out these programmes aggressively to more residential buildings to attract new tenants.”

The residential vacancies decreased to 7% since February 2022. Subsequent to half-year, the occupancy level improved considerably at The Fields with the students’ take-up of shared/furnished accommodation, and at Kempton Place through the increased activity at OR Tambo International Airport, with both ex- and new tenants returning to take up occupation.

Over the last two years, Octodec’s retail portfolio has felt the impact of the lockdown restrictions. Many offices and government departments are still applying the work-from-home policy, at least on a rotational basis. Therefore, footfall has not returned to pre-COVID levels in the CBDs. Nevertheless, on a like-for-like basis and excluding COVID-19 rental discounts, rental income from retail increased by 4.0%.

Wapnick says: “Although there has been a continued downward resetting of rentals across the sectors, it is pleasing to see that from an Octodec perspective, several renewals are being concluded at increased rentals, and we continue to experience demand from large retailers for space in both Johannesburg and Tshwane CBDs.”

Educational facilities and Places of worship are experiencing increased student numbers and congregants respectively. However, the period was characterised by challenging trading conditions and these institutions are only beginning to emerge from the pandemic. Encouragingly, there has been an improvement with new inquiries and collections from these two sectors.

Octodec’s office portfolio has also been adversely affected by the current weak economic climate. In addition, the oversupply of office space has put pressure on occupancy levels, which is in line with the broader sector. Although vacancies have remained stable, rental income has reduced marginally by 1.5% on a like-for-like basis and before COVID-19 rental discounts.

Octodec’s industrial portfolio has performed relatively well. However, there have been negative rental reversions and a resetting of rentals. As a result, rental on a like-for-like basis and before COVID-19 rental discounts decreased by 4.5%. Occupancy in the industrial sector has remained stable, with a number of our industrial buildings 100% occupied.

Wapnick adds: “Even though Octodec’s properties were not directly impacted by the civil unrest in 2021, the impact of the unrest on the economy partially affected Octodec’s collections during this period.”

Vacancies

As a percentage of gross lettable area, including properties held for redevelopment, vacancies have improved marginally to 22.6% compared to 22.8% at 31 August 2021. The group’s core vacancies, which exclude the GLA relating to properties held for redevelopment or disposal, decreased from 16.2% to 15.8%.

The residential sector reflected a considerable decrease in vacancies compared to August 2021. Residential vacancies reflect an improvement from 24.3% at February 2021 to 15.4% at 28 February 2022. Despite pressure on rental income in the industrial sector, the vacancies have decreased from 11.7% to 9.9%. Retail shopping centre core vacancies also improved from 7.3% to 6.0%, with Octodec’s convenience shopping centres being well let.

Disposals

“Octodec remains focused on its balance sheet optimisation, and disposal strategies to pay down debt and refinance loans where needed. Active balance sheet management and liquidity planning have shielded the business resulting in an improved LTV,” comments Anabel Viera, Financial Director of Octodec.

With the lifting of COVID-19 lockdown restrictions, Octodec has seen an improvement in the conclusion of sales of properties previously identified for sale. Against this backdrop, Octodec has sold and transferred 12 properties for a total net consideration of R121.6 million.

Dividend

The board of Octodec has declared a cash dividend of 50 cents per share for the year ended 28 February 2022. However, given the broader economic and political uncertainty, the board will not be providing any guidance on distributable income and dividends for the second half of FY2022.

Speaking to prospects in the sector, Wapnick concludes: “Consumer confidence has risen in light of the cancellation of the lockdown restrictions, and there is a renewed energy in the Tshwane CBD. However, the local macro environment remains a cause for concern. With GDP expected to grow at under 2% for the foreseeable future, we do not anticipate significant growth in rental income. In addition, inflation is also expected to increase, which will also impact our costs and ultimately, net property income. With that said, Octodec remains resilient thanks to Management’s intimate knowledge of the underlying assets in the portfolio and the broader property market.”

Integrated Report 2021

This report explains how Octodec creates sustainable value for our stakeholders and
the social impact we make on the communities within which we operate. It provides an
overview of our business model and strategy in the context of our risk framework and
operating environment.

Octodec Announces 2021 Annual Results

A strong focus on property fundamentals and robust portfolio ensures measured Octodec performance amid challenging low growth environment

  • Distributable earnings before tax of R401.1 million, a decrease of 4.6%
  • Reduction in the all-in annual weighted average cost of borrowings to 8.5% (FY20: 8.7%)
  • Rental relief granted in support of tenants through rental discounts substantially reduced to 1.6% of rental income
  • Generally strong level of collections, averaging 100% over the year
  • 0,4% increase in vacancies indicative of stability returning
  • Active balance sheet management and liquidity planning showing results
  • Robust and encouraging post-reporting period property fundamentals

Tuesday, 2 November 2021 – JSE listed REIT Octodec Investments Limited, today announced its annual results for the year ended 31 August 2021, against a weakened economic environment. COVID-19 and the consequent lockdowns and restrictions that continued through FY2021 significantly impacted Octodec’s performance.

Octodec’s distributable income decreased by 4.6% before tax and 14.1% after tax, mainly attributable to a reduction in rental income caused by rent relief granted to their tenants who were detrimentally affected by the COVID-19 lockdown restrictions, negative rental reversions and an increase in residential vacancies for a significant portion of the year.

Jeffrey Wapnick, Managing Director of Octodec, commented: “The lockdown severely impacted certain sectors due to their level of social interaction, such as hospitality, places of worship and universities and colleges, many of which had moved their tuition online during the year.”

The rental relief granted through rental discounts, decreased significantly to 1.6% of rental income (FY2020: 5.3%), On a like-for-like basis, before the COVID-19 rental discounts granted, overall rental income decreased by 7.3%. In addition, rental income from the residential sector and specialised sectors decreased by 10.6% and 15.4%, respectively, mainly attributable to the impact that COVID-19 and the lockdown had on these sectors.

A decrease in collections, specifically during January and February 2021 was primarily due to typically slower collections in these months. Although Octodec’s properties did not suffer damage during the civil unrest in July 2021, this did have a temporary impact on collections.

A longer business recovery period was expected for tenants in the education, places of worship and hotel sectors resulting in lower collection levels. However, these sectors represent only 3.7% of Octodec’s total rental income, and total collections have remained at acceptable levels.

Explaining actions taken to retain and attract tenants, Wapnick said: “Our smaller retail tenants and restaurants rely on foot traffic from residential and office tenants, and the hybrid working model has affected their turnover. Octodec has responded to the challenging environment through various initiatives such as the ongoing roll-out of Wi-Fi to residential buildings and the embedding of online applications forms on our recently upgraded digital platform. These enhanced digital capabilities, as well as the broadening of our offering, including newly furnished apartments and shared accommodation at The Fields, to our expanded tenant demographic, forms part of our forward-looking strategy as we position the Group for growth.”

Vacancies relatively well contained
Vacancies in the Octodec portfolio including properties held for redevelopment, increased by 1.1% to 22.8% of the gross lettable area (GLA) (FY2020: 21.7%). The Group’s core vacancies, which exclude the GLA relating to properties held for development, increased by 0.4% to 16.2% (FY2020: 15.8%).
The commercial sector experienced increased vacancies, primarily as a result of COVID-19, which impacted trading conditions and resulted in tenant failures.

Retail shopping centres, comprising mainly convenience and neighbourhood centres, which remain well let with low vacancies, proved to be relatively defensive in this environment. Speaking to the impact of COVID-19 in the year, Wapnick said: “Initially, the majority of our commercial tenants were afforded rental relief in the form of discounts rather than deferrals or payment plans, especially small, medium and microenterprises (SMMEs) which continue to be the most affected. However, more recently, with each lease renewal, tenants are looking for reduced rentals rather than a once-off discount. Tenant retention remains a high priority for Octodec and we continue to engage with tenants to ensure that tenants survive the adverse effects of the pandemic.”

Against this backdrop, Octodec has strengthened its balance sheet to ensure prudent financial management. Octodec has continued to generate good cash flows in spite of the challenging circumstances, with 100% of billings collected during the year. Additionally, no covenants have been breached, and Octodec’s interest-cover-ratio (ICR) was within the limit for each lender.

“The effects of COVID-19 still linger but the diversified and granular nature of the portfolio, together with Management’s intimate knowledge of the portfolio and the broader property market have stood the business in good stead. In addition, active balance sheet management and liquidity planning have shielded the business. We will continue to take proactive steps to mitigate the reduction in earnings, optimise working capital and preserve cash flow and liquidity, thereby protecting the business,” commented Anabel Viera, FD of Octodec.

Dividend Declaration
The board of Octodec has declared a dividend of 50 cents per share for the year ended 31 August 2021. The decision to reduce the dividend is aligned to Octodec’s strategic objective to reduce debt, strengthen its balance sheet and conserve cash for essential capital expenditure, whilst retaining its REIT status.

“The decision to reduce the dividend is in line with Octodec’s decision to pay out the minimum distribution requirement to retain its REIT status while utilising the available assessed losses in the Group. While we remain cautious on the outlook, we are well-positioned to navigate the market challenges into the recovery phase. There are green shoots and early signs that the worst of COVID-19 may be behind us,” concludes Wapnick

Interim performance reflective of ongoing COVID-19-related pressure on tenants and the trading environment

Benefit of strategic actions and initial signs of recovery coming through in early H2 trading
• Distributable earnings of R199 million weighed down by Covid-19 implications
• Rental income including rental discounts of R26 million, down 10.8% at R899 million
• Generally strong level of collections, averaging 95% over the period
• 3% increase in vacancies due to weak trading environment and unusual leasing cycle
• Seven non-core properties disposed of for a total of R26 million
• Active balance sheet management and liquidity planning protected the business
• Robust and encouraging post-reporting period property fundamentals

JSE listed REIT Octodec Investments Limited, today reported its results for the six months ended 28 February 2021, against a weak economic environment exacerbated by the COVID-19 pandemic and country lockdown. COVID-19 implications saw some residential tenants return to their family homes, increased unemployment, certain business failures and overall reduced affordability which weakened the trading environment and impacted the Group’s performance.

Tenant relief of R26 million, mainly in the form of discounts selectively granted to the worst affected tenants, was greatly reduced compared to the past six months and rental collections remained high averaging 95%. However, the rise in vacancies, particularly in the residential and retail shops sectors, lower rentals on renewal of leases added to the loss of rental income which ended down 10.8% for the half-year. Despite property costs being mostly contained, and reduced administrative and finance costs, distributable earnings declined to R199 million.

Jeffrey Wapnick, Managing Director of Octodec commented: “The social and economic fallout from COVID-19 lockdown restrictions weighed on our tenant base and consequently on our performance. Octodec has survived 63 years of economic cycles and we are confident that we have taken the necessary steps to proactively respond to challenges and position the business to benefit from a recovery. Octodec’s resilience is underpinned by, management’s intimate knowledge of the portfolio and markets, the diversified portfolio and granular tenant base, strong cash generation and prudent financial management.”

Occupancy levels were down 3% overall, driven mainly by the usual peak in residential vacancies experienced at the end of the calendar and academic year, followed by a delayed uptick in leasing in the new year. Commercial vacancies, save for retail shops, were relatively stable owing to continued demand for Octodec’s quality offering and active leasing. The retail shopping centres portfolio comprising mainly convenience and neighbourhood centres, proved to be defensive given its limited vacancies and ongoing support from consumers.

During the period, a digital leasing system was implemented and an emphasis was placed on digital marketing to attract new tenants. The rollout of Wi-Fi to residential buildings was expedited with a few completed during the period, ensuring that these buildings remain relevant and attractive to tenants. Additionally, furnished apartments and shared accommodation were introduced at The Fields in Hatfield with a second phase successfully launched during the period.

Speaking to the post reporting period improvements in trading experienced, Wapnick said: “The city ‘buzz’ is back with the return of people to the city centres and virtually all retail tenants are trading. Leasing activity has picked up across sectors and we are seeing renewed confidence from national tenants to commit to leases. Residential vacancies have come down nicely following the delayed start to the tertiary academic year and rental payment patterns are becoming more predictable with collections averaging 99%. The benefits of our digital marketing push and enhanced digital leasing capabilities are also beginning to come through in the form of increased leasing activity, cost efficiencies, ease of transacting and improved customer service as well as an extension of our target market reach.”

In line with the decision taken by management to preserve cash, Octodec did not undertake any major new developments and instead focused on maintaining and carrying out smaller upgrades of properties or lease-driven projects. The business completed the refurbishment of Leo’s Place, a residential property in Tshwane Arcadia, at a total cost of R11.7 million, which included a recreational area and the renovation of the common areas to a more contemporary look that appeals to the younger occupants.

Octodec continued with active marketing of the properties held for sale and entered into numerous conditional agreements with buyers. In the current environment, it is difficult for buyers to secure funding, drawing out the disposal process. During the period, the Group disposed of seven properties for a total consideration of R26.3 million. Three of these properties transferred for a total consideration of R6.5 million and transfer of the remaining properties is expected to take place before the end of the financial year.

Octodec finished the period on a sound financial footing with sufficient facilities available to honour commitments. Cash generation during the period remained strong at R388 million and unutilised available banking facilities totalled R313 million. Management proactively addressed short term loan expiries and extended swap maturities while also managing covenant headroom and flexibility. The group’s LTV was 44.2%, well within bank covenant levels of 50% despite the 4,3% devaluation of the property portfolio to R11.3 billion.

“We are comfortable with the Group’s financial position and our solid banking relationships continue to serve us well in our proactive and constructive engagements with funders, who are supportive. Cash flow discipline remains a key focus and we are closely monitoring vacancies and rental payment trends to ensure robust liquidity planning and management,” commented Anthony Stein, FD of Octodec.

Due to ongoing uncertainty around subsequent waves of infection and further lockdown restrictions, no interim dividend has been declared. The decision around a final dividend will be made at the time of the release of the annual results. Management is committed to the Group strategy and is continuously exploring innovative initiatives to unlock value in the properties.

“While we remain cautious on the outlook and it is early days, we are encouraged by the green shoots we are seeing in improved occupancies, collections and leasing activity since March and are hopeful that this is an indication that the worst is behind us. We will continue to be responsive to the dynamic environment by actively managing the portfolio and factors within our control, positioning the Group to navigate the headwinds and take advantage of a change in tide,” Wapnick concluded.

Octodec Announces 2021 Interim Results

Interim performance reflective of ongoing COVID-19-related pressure on tenants and the trading environment

Benefit of strategic actions and initial signs of recovery coming through in early H2 trading

  • Distributable earnings of R199 million weighed down by Covid-19 implications
  • Rental income including rental discounts of R26 million, down 10.8% at R899million
  • Generally strong level of collections, averaging 95% over the period
  • 3% increase invacancies due to weak trading environment and unusual leasing cycle
  • Seven non-core properties disposed of foratotal of R26 million
  • Active balance sheet management and liquidity planning protected the business
  • Robust and encouraging post-reporting period property fundamentals

Wednesday, 21 April 2021 –JSE listed REIT Octodec Investments Limited, today reported its results for the six months ended 28 February 2021, against a weak economic environment exacerbated by the COVID-19 pandemic and country lockdown.COVID-19implications saw some residential tenants return to their family homes, increased unemployment, certain business failures, and overall reduced affordability which weakened the trading environment and impacted the Group’s performance.

Tenant relief of R26 million, mainly in the form of discounts selectively granted to the worst affected tenants, was greatly reduced compared to the past six months and rental collections remained high averaging 95%. However, the rise in vacancies, particularly in the residential and retail shops sectors, lower rentals on renewal of leases added to the loss of rental income which ended down 10.8% for the half-year. Despite property costs being mostly contained, and reduced administrative and finance costs, distributable earnings declined to R199 million.

Jeffrey Wapnick, Managing Director of Octodec commented: “The social and economic fallout from COVID-19 lockdown restrictions weighed on our tenant base and consequently on our performance. Octodec has survived 63 years of economic cycles and we are confident that we have taken the necessary steps to proactively respond to challenges and position the business to benefit from a recovery. Octodec’s resilience is underpinned by, management’s intimate knowledge of the portfolio and markets, the diversified portfolio and granular tenant base, strong cash generation and prudent financial management.”

Occupancy levels were down 3% overall, driven mainly by the usual peak in residential vacancies experienced at the end of the calendar and academic year, followed by a delayed uptick in leasing in the new year. Commercial vacancies, save for retail shops, were relatively stable owing to continued demand for Octodec’s quality offering and active leasing. The retail shopping centres portfolio comprising mainly convenience and neighbourhood centres, proved to be defensive given its limited vacancies and ongoing support from consumers.

During the period, a digital leasing system was implemented and an emphasis was placed on digital marketing to attract new tenants. The rollout of Wi-Fi to residential buildings was expedited with a few completed during the period, ensuring that these buildings remain relevant and attractive to tenants. Additionally, furnished apartments and shared accommodation were introduced at The Fields in Hatfield with a second phase successfully launched during the period.

Speaking to the post reporting period improvements in trading experienced, Wapnick said: “The city ‘buzz’ is back with the return of people to the city centres and virtually all retail tenants are trading. Leasing activity has picked up across sectors and we are seeing renewed confidence from national tenants to commit to leases. Residential vacancies have come down nicely following the delayed start to the tertiary academic year and rental payment patterns are becoming more predictable with collections averaging 99%. The benefits of our digital marketing push and enhanced digital leasing capabilities are also beginning to come through in the form of increased leasing activity, cost efficiencies, ease of transacting and improved customer service as well as an extension of our target market reach.”

In line with the decision taken by management to preserve cash, Octodec did not undertake any major new developments and instead focused on maintaining and carrying out smaller upgrades of properties or lease-driven projects. The business completed the refurbishment of Leo’s Place, a residential property in Tshwane Arcadia, at a total cost of R11.7 million, which included a recreational area and the renovation of the common areas to a more contemporary look that appeals to the younger occupants.

Octodec continued with active marketing of the properties held for sale and entered into numerous conditional agreements with buyers. In the current environment, it is difficult for buyers to secure funding, drawing out the disposal process. During the period, the Group disposed of seven properties for a total consideration of R26.3 million. Three of these properties transferred for a total consideration of R6.5 million and transfer of the remaining properties is expected to take place before the end of the financial year.

Octodec finished the period on a sound financial footing with sufficient facilities available to honour commitments. Cash generation during the period remained strong at R388 million and unutilised available banking facilities totalled R313 million. Management proactively addressed short term loan expiries and extended swap maturities while also managing covenant headroom and flexibility. The group’s LTV was 44.2%, well within bank covenant levels of 50% despite the 4,3% devaluation of the property portfolio to R11.3 billion.

“We are comfortable with the Group’s financial position and our solid banking relationships continue to serve us well in our proactive and constructive engagements with funders, who are supportive. Cash flow discipline remains a key focus and we are closely monitoring vacancies and rental payment trends to ensure robust liquidity planning and management,” commented Anthony Stein, FD of Octodec.

Due to ongoing uncertainty around subsequent waves of infection and further lockdown restrictions, no interim dividend has been declared. The decision around a final dividend will be made at the time of the release of the annual results. Management is committed to the Group strategy and is continuously exploring innovative initiatives to unlock value in the properties.

“While we remain cautious on the outlook and it is early days, we are encouraged by the green shoots we are seeing in improved occupancies, collections and leasing activity since March and are hopeful that this is an indication that the worst is behind us. We will continue to be responsive to the dynamic environment by actively managing the portfolio and factors within our control, positioning the Group to navigate the headwinds and take advantage of a change in tide,” Wapnick concluded.

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