Johannesburg - Listed property firm Octodec Investments plans cautious speculative refurbishment of some of the office buildings in its portfolio in an attempt to secure government leases.
Managing director Jeffrey Wapnick said yesterday that the recent redevelopment of Centre Walk in Tshwane had resulted in Octodec securing a 9 365m² government office lease effective from March 1 at a total monthly rental of R870 800.
Wapnick said a five-year lease had been secured for the building for the departments of justice and constitutional development and rural development and land reform.
But Wapnick said Octodec did not have any office building of material size right now to offer to government and could not take government to a building that was not renovated.
He said: “But we would not fix up the whole building with air conditioning and wait.”
But Wapnick said if the government wanted to get the space it needed it had to sign longer leases, adding no landlord would fix up a building for a two-year lease with a 5.5 percent escalation.
Encouraged
“Continued investment in our portfolio contributes to the upliftment of the CBDs and positions us strongly to navigate challenging economic conditions as people increasingly look for value. “We are also encouraged by the significant investments by government in infrastructure…” he said.
Wapnick confirmed Octodec would be converting the Van Riebeeck Medical Building in the Tshwane central business district into 195 residential units at a cost of about R110m.
Octodec acquired the building in the six months to February from a private buyer for R29 million, he said.
Wapnick said Octodec had acquired several other properties with high vacancies, including Centre Walk and Fedsure. “These properties offer significant redevelopment opportunities, with resulting value being realised over time.”
Octodec yesterday reported a 1.7 percent growth in distributions to 98.4c in the six months to February from 96.8c in the previous corresponding period. The firm previously forecast distribution growth of between 6 percent and 8 percent for this financial year.
Wapnick admitted they were over bullish on the higher end but expected to achieve distribution growth of about 6 percent for the full year.
Anthony Stein, the financial director of Octodec, said distributions in the first six months were diluted by a number of factors. These included an anticipated loss of R4.5 million in the first six months from the office conversion into apartments of Frank’s Place in Johannesburg; the R27 million to refurbish of Centre Walk; and expenditure on some smaller projects with the rental also only coming through in the second half.
Wapnick added there were various indicators other than distributions to assess the progress of a property business, including bad debt ratios, changes in arrears, vacancies and rental escalations.
“That part of the business is fine,” he said.
Shares in Octodec dropped 5.1 percent yesterday to R23.63.
BUSINESS REPORT