File picture: James White/Free Images
File picture: James White/Free Images

Octodec in shape to withstand tough times

By Edward West Time of article published May 14, 2019

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CAPE TOWN - Johannesburg and Tshwane property group Octodec Investment grew rental income 5.2percent to R47.9million in the six months to end-February and was in robust shape to ride out the tough economic environment, managing director Jeffrey Wapnick said yesterday.

An interim dividend of 101.7cents per share was declared. The second half dividend was likely to be slightly lower than the first half, because of the Edcon restructuring, the group taking a slightly more conservative approach on its balance sheet and the impact of a large motor group moving out, he said in a telephone interview.

Wapnick said that with some 14000 tenants, the bulk of the risk to the group was from its larger clients. However, he believed “we are at the bottom of the economic cycle” and the group had “positioned itself” to withstand tough times.

Like-for-like rental income growth of 2.2percent was reported from its 293 properties, bolstered by a strong contribution from the residential portfolio.

Property costs increased due to higher utility costs and assessment rate charges, and an increase in property management costs.

Bad debt and provisions were little changed at 1.3percent of total tenant income.

Wapnick said public confidence and spending power had been weighed down by the weak economy, rising costs and political uncertainty.

“During the period, we focused on managing vacancies, improving the value of existing assets and recycling capital through the disposal of non-core or under-performing properties,” he said.

The portfolio was impacted by pressure on rental income growth as well as an increase in property operating costs and higher finance charges. “We have all learnt the value of customer retention,” he said.

Occupancy levels were stable, showing a slight decrease in both total and core vacancies which were at 17.7percent and 11.3percent, respectively.

Sharon’s Place, an affordable (R3500 to R8000 a month) urban development of some 400 units in Tshwane, was 98percent occupied as at February 2019, and was expected to deliver strong growth in rental income.

To provide an indication of how strong the demand was for this kind of development, Wapnick said the 90 units in the first tower of this development were sold within eight days.

Several smaller projects were under way to improve occupancy levels and enhance the value of the portfolio and to uplift the areas in which Octodec was invested.

The remaining 50percent of two joint ventures, Kempton Place and The Brooklyn, was acquired for R36.5m cash, at an initial yield of 9.5percent.

Fourteen properties were sold. Six of these had transferred for R98.8m, at an average combined exit yield of 5.1percent and 0.7percent premium to book value.

Octodec shares rose 1.28percent on the JSE yesterday to close at R19.75.


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