Increased commercial and residential leasing activity bolsters Octodec’s half-year rental income

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Group identifies several development opportunities and continues to benefit from improved LTV and strengthened balance sheet  

Highlights:

  • Rental income increase of 3.2% to R974.2 mil (HY2022: R944.4 mil)
  • Like-for-like rental growth of 4.1% (HY2022: 1.2%)
  • Cash generated from operating activities before dividend payment R239.8 mil (HY2022: R193.9 mil)
  • Distributable income after tax (REIT funds from operations R234.5 mil (HY2022: R211.8 mil)
  • All-in weighted average cost of funding 9.0% (FY2022: 8.7%)
  • Distributable income per share (cents) 88.1 (HY2022: 79.6)
  • Dividend per share (cents) 60.0 (HY2022: 50.0)
  • Net asset value (NAV) per share R24.01 (FY2022: R23.28)
  • Loan-to-value (LTV) 38.8% (FY2022: 39.7%)
Tuesday, 16 May 2023 – JSE-listed REIT Octodec Investments Limited today announced its interim results for the six months ended 28 February 2023, recording solid income growth driven largely by improved occupancy and higher rentals in its residential portfolio. Rental growth across most sectors remains stable against the backdrop of the difficult economic trading conditions. Several renewals of commercial leases are being concluded at increased rentals and demand for space in the Johannesburg and Tshwane CBDs remains strong.

Portfolio Performance

Octodec achieved revenue growth of 3.2% across its portfolio, driven primarily by a 10.3% increase in the residential portfolio, which has performed exceptionally well. Property costs, both on a gross and net basis, have improved marginally when compared to the prior period through hands-on management of properties. Residential vacancies continued to decrease in the Kempton Park, Johannesburg, and Tshwane CBDs. The successful introduction of shared and furnished accommodation options at The Fields, together with value-add services such as free Wi-Fi and the cashless Wash Bars at several of our buildings contributed to the improved occupancy and ensure that Octodec’s residential assets remain in high demand. Despite the seasonal fluctuation in occupancy in the residential sector, which is generally higher during the period, the vacancies decreased significantly to 6.9% in February 2023. This is inclusive of The Fields, which was impacted in part by the reduction in the National Student Financial Aid Scheme (NSFAS) allowance to students. Octodec has revised its offering to accommodate those affected by this reduction. Occupancy at other properties where students reside who are not funded by NSFAS, has not been impacted. Commenting on the half-year results, Jeffrey Wapnick, Octodec MD says: “This positive performance highlights that our unique, affordable, and quality products across all our sectors continue to be attractive and value-enhancing. Despite economic pressures, we retain our competitive edge which is supported by our in-depth knowledge of tenants’ needs and the introduction of attractive initiatives in both the Tshwane and Johannesburg CBDs. This encourages our continued focus to leverage opportunities that enhance our buildings and attract new tenants while improving our occupancy.” Octodec’s retail portfolio is unique, whereby its retail street shops are largely concentrated in the Tshwane and Johannesburg CBDs. We have seen improved footfall in the CBDs, particularly in the Tshwane CBD, although this has not necessarily translated into improved turnovers for our retail tenants. On a like-for-like basis, rental income increased by 3.2%. This growth was muted due to Standard Bank and Nedbank having vacated from two of our buildings during HFY2023. Octodec’s portfolio of retail shopping centres, which largely comprise convenience shopping centres, continues to perform strongly, with core vacancies at 6.4% and excluding Killarney Mall, is at 0.1%. Rental income from our shopping centres, including Killarney Mall, increased by 3.6% on a like-for-like basis. Jeffrey Wapnick adds: “We believe that despite the growing challenges around the reliable supply of electricity and underperforming municipalities, there is a renewed energy and restored confidence in the CBDs. While there has been less activity in the street shops due to constrained market conditions for consumers, leasing activity has increased and there is take up in spaces that were previously unattractive. We remain focused on our conversion and repurposing strategy as our well-located CBD assets continue to enjoy increased demand from large scale national retailers. This, we believe, positions us for growth as our tenants see value in our portfolios.” The office sector remains under pressure despite improved leasing activity. Although core vacancies improved slightly, rental reversions in the sector, together with some tenants vacating at the end of the prior year, contributed to a decrease in rental income in this sector of 5.4%. The industrial sector has proved to be resilient under the current operating conditions with rental income increasing by 7.8% and leases being concluded at an average increase of 7%. Vacancies have decreased and overall occupancy improved further to 94.3% since the previous reporting period. According to Octodec FD, Anabel Vieira, “Despite the challenging interest rate environment, we continue to manage our balance sheet and debt and together with a positive valuation of our property portfolio, we have achieved a further decrease in our LTV. We are actively monitoring opportunities to extend hedges and continue our efforts to improve our debt maturity profile.”

Development and Disposals

Octodec is currently refurbishing the common and entertainment areas at Vuselela Place, a mixed-use residential and retail building in the Johannesburg CBD. Furthermore, we are repurposing Ina Building, a vacant office building adjacent to Louis Pasteur Medical Centre into medical suites. We are excited by the demand thus far and completion is expected by January 2024. Octodec disposed of 5 properties identified in the current period and continues to focus on disposal opportunities at acceptable prices and progress has been made in this area.

Prospects

Jeffrey Wapnick concludes: “We remain focused on providing steady distributions to our shareholders. The Group has undertaken a prudent approach to capital management, and we remain cautious in our approach to developments without compromising on quality. While rising inflation, increasing energy costs and high interest rates have created difficult operating conditions for businesses, we are confident that Octodec’s strategy and diversified portfolio is well positioned for future growth given an improved economic environment.”

Dividend

With distributable income after tax increasing by 10.7%, the Board has declared an interim dividend of 60.0 cents per share for the six months ended 28 February 2023 (28 February 2022: 50.0 cents). This represents an increase of 20% on HFY2022.
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Octodec to have a secondary listing on A2X

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JSE listed REIT, Octodec Investments, today announced that it has been approved for a secondary listing on A2X Markets.

The group informed shareholders that its primary listing on the JSE and issued share capital will be unaffected by the secondary listing on A2X.

A2X is a licensed stock exchange authorised to provide a secondary listing venue for companies and is regulated by the South African Financial Sector Conduct Authority in terms of the Financial Markets Act 19 of 2012.

Octodec launches newly upgraded, landmark Shoprite building in Tshwane CBD

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The Company completes its R60 million multifaceted Shoprite upgrade, playing its part in uplifting Tshwane retail business district.

23 February 2023 – JSE listed REIT, Octodec Investments Limited, today unveiled the new look and feel of its Shoprite building in the heart of the Tshwane CBD – a R60 million investment project announced in August 2022 to boost and uplift the bustling central node.

Jeffrey Wapnick, MD of Octodec, says, “This project cements our commitment to the City of Tshwane which continuously presents growth opportunities for our already dominant inner-city retail and residential portfolio. It represents a renewal of our relationship and an upgrade of our service to a city that is increasingly attracting national retailers.”

“We are excited to see this new building bring an elevated experience to our tenants, who have trusted us with quality developments that enhance their day-to-day lives. It is a value adding project that will further deepen the trust and confidence our clients have in our inner-city knowledge, which bodes long term relations,” added Wapnick.

While Shoprite continued to trade during the upgrade, tenants will now enjoy their daily shopping in a newly furbished 4000m² Shoprite supermarket which includes a new Shoprite Liquor and new retail shops on the ground floor.

In addition, the tenants will be exposed to other prominent brand-new architectural elements such as a triple volume entrance with escalator access from Helen Joseph Street, which lead downwards to the newly refurbished OK Furniture store.

A launch event was held with Shoprite staff celebrating the new building and exciting customer activities including prize giveaways from in-store suppliers and Shoprite-branded promotional items.

Global Credit Ratings (GCR) reaffirms Octodec’s rating

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Global Credit Ratings (GCR) reaffirms Octodec’s rating

JSE listed REIT Octodec Investments Limited today announced that Global Credit Ratings (GCR) had reaffirmed Octodec’s credit rating.

Shareholders and noteholders are advised that GCR undertook a credit rating review of Octodec, as guarantor of wholly owned subsidiary Premium Properties Limited’s Domestic Medium-Term Note Programme dated 23 February 2015. On 21 February 2023, GCR re-affirmed the long-term national scale issuer rating assigned to Octodec of A-(za) and the short-term issuer rating of A2(za), with the outlook stable.

GCR’s credit rating announcement is publicly available on GCR’s website at https://gcrratings.com/announcements/gcr-affirms-octodec-investments-limiteds-issuer-ratings-of-a-za-a2za-with-a-stable-outlook/

Shareholders and noteholders can also contact Elize Greeff at elizeg@octodec.co.za to request an electronic version.

 

Octodec announces FY2022 results

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Strong income growth due to material reduction in residential vacancies bolsters Octodec’s full year performance

Accelerated disposal programme and improved performance results in improved loan-to-value (LTV) ratio

Highlights:

  • Rental income R1 930.5 mil (FY2021: R1 838.7 mil)
  • Profit (loss) for the year R605.1 mil (FY2021: (R174.8 mil))
  • Distributable income after tax (REIT funds from operations R466.1 mil (FY2021: R358.4 mil)
  • Cash generated from operating activities before dividend payment R391.1 mil (FY2021: R357.4 mil)
  • All-in weighted average cost of funding 8.7% (FY2021: 8.5%)
  • Distributable income per share (cents) 175.1 (FY2021: 134.6)
  • Dividend per share (cents) 130.0 (FY2021: 50.0)
  • Net asset value (NAV) per share R23.28 (FY2021: R23.20)
  • Loan-to-value (LTV) 39.7% (FY2021: 43.2%)

Tuesday, 1 November 2022 – JSE listed REIT Octodec Investments Limited today announced its annual results for the year ended 31 August 2022, recording a large dividend pay-out and a material reduction in vacancies in the residential and industrial sectors, with the residential portfolio in particular performing ahead of expectations. Although there has been a continued downward resetting of rentals across most sectors, from an Octodec perspective, several renewals are being concluded at increased rentals and demand for space in both Johannesburg and Tshwane CBDs remains strong.

Portfolio Performance

Octodec has experienced an increase in residential leasing activity resulting in significantly reduced vacancies and positive reversions on renewals which have positively impacted the Group’s results.

Residential income increased 7.6% year on year primarily due to the return of students to universities for in-person classes and increased activity at OR Tambo Airport, which greatly benefited letting activity at Kempton Place. Added to this, initiatives such as the introduction of shared and furnished accommodation at some of its residential buildings, and value-added services such as complimentary Wi-Fi for tenants in various other buildings resulted in increased demand.

Commenting on the growth within the residential sector, Jeffrey Wapnick says: “There is a clear demand for affordable, quality accommodation in both the Tshwane and Johannesburg CBDs. Due to the success of our value-enhancing initiatives, we have seen an impressive 33.0% increase in leasing enquiries. We intend to accelerate the rollout of these offerings to more residential buildings to attract new tenants.

With vacancies almost at pre-COVID-19 levels, the focus will now change to increasing rentals per unit while at the same time being cautious of the impact that high inflation and increased interest rates will have on the disposable income of tenants and the consequential effect on vacancies.”

Retail shopping centres continued to perform well, with positive reversions on new leases and renewals. As a result, rental income from Octodec’s shopping centres increased by 5.9% year on year. However, the first half of the year was still impacted by lockdown restrictions and the Group’s street shops experienced subdued activity with several negative rental reversions concluded during the year, and a slight increase in vacancies has resulted in a marginal increase in rental of 3.0% year on year.

Jeffrey Wapnick adds: “Our CBD assets are well located in convenient locations with high foot traffic. Despite market conditions still being under pressure for the typical South African consumer, we continue to see renewed confidence from large national retailers to sign extended leases for larger pockets of space and willingness to test the CBD market with brands previously only found in malls.”

In the office portfolio, the oversupply of office space in the major cities, due to hybrid or work-from-home models, continues to put pressure on occupancy levels at office buildings, corresponding with the broader sector trend. As a result, rental income in the office sector decreased by 1.3% year on year.

Despite general rental pressure in the industrial sector, occupancy has improved considerably, with a number of Octodec’s industrial buildings being 100% occupied. During the year, many new enquiries were received, and the Group experienced improved collections from places of worship and some colleges within its specialised portfolio.

According to Octodec FD, Anabel Vieira, “The distributable earnings calculation was positively impacted by reduced debt and the lower interest rate environment (at the time), which reduced finance costs.

We have made strides over the past two years to manage both our hedging profile and debt maturity profile, and we will continue to monitor opportunities to extend existing hedges, where appropriate.”

Disposals

There has been a marked improvement in the conclusion of sales of properties previously identified for sale. Octodec has sold and transferred 20 properties for a total net consideration of R218.4 million.

Prospects

Jeffrey Wapnick concludes: “From a capital management perspective, our focus remains on maintaining a healthy balance sheet with an acceptable loan-to-value ratio. We will continue to assess new development and conversion opportunities as they present themselves, and as such, Octodec will retain sufficient funds for developments and acquisitions for this purpose while at the same time providing a steady distribution to our shareholders.

Although the property sector as a whole faces certain headwinds, including poor municipal service delivery as well as rising inflation, increasing utilities costs and high-interest rates, we are confident that Octodec is well positioned through its niche expertise, diversified and defensive portfolio to benefit from a medium-to-long term economic recovery.”

Dividend

Distributable income after tax increased by 30.0% from R358.4 million to R466.1 million. the Board has declared a final dividend of 80.0 cents per share, with a total dividend of 130.0 cents for the full year (FY2021: 50.0 cents) – a 160% increase on the prior year.

 

 

 

Octodec and Property Point join hands to empower emerging black businesses

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Octodec Investments is proud to announce its newly launched partnership with Property Point. Octodec will support two black property valuer firms through its Enterprise Development Programme. These two individuals are hopefully the first of many who will receive support from Octodec through this programme.

This initiative is a testament to Octodec’s commitment to its CSR strategy. As a business that regularly monitors and prioritises its social and environmental impact, Octodec aspires to create value beyond financial return.

Aligned to this, Mogalakwena Valuers and Intengo Valuers and Property Consultants were recently inducted into Property Point’s programme, with the intention of empowering these two black-owned property valuation businesses over the medium-to-long term.

The individuals will have the opportunity to grow their businesses to a point where they are able to provide the services required by listed companies, ultimately ensuring their best chance at success.

Octodec recognises that its efforts make a difference in the lives of the people, communities, and areas in which it operates, and are thrilled by the prospect of working with both businesses in the near future.

A strong entrepreneurial ecosystem underpins Octodec’s relationship with its supplier community, across various industries, to stimulate local economies. However, the commercial success of these businesses requires more than good ideas. It requires intensive and accelerated training in the form of improving sales and marketing, business, financial and people management. Octodec has partnered with Property Point to achieve exactly this.