Octodec Investments defers decision on year-end dividend until 2021
CAPE TOWN - OCTODEC Investments, one of the biggest landlords in the Johannesburg and Pretoria central business districts, has deferred a decision on a year-end dividend until February 2021 due to the uncertain economic environment.
And if a decision was made to declare a payout, it would be at a ratio of 75 percent of distributable earnings, instead of the traditional 100 percent, to maintain balance sheet strength, operational flexibility and to reduce risk, managing director Jeffrey Wapnick said in a telephone interview yesterday.
The real estate investment trust with a R11.8 billion portfolio of residential, retail, office and industrial properties yesterday reported a 22 percent slide in distributable income to 156.8 cents per share for the year to August 31. Last year’s distribution came to 200.9c per share.
The economic fallout of the lockdown, the weak economy, relief granted to tenants detrimentally affected by the Covid-19 shutdown, rental reversions and higher vacancies were the main reasons for lower distributable income.
Lockdown relief by way of rental discounts resulted in a decrease in rental income of 5.3 percent, compared to a 0.1 percent decrease before the rent relief.
While most property costs were reduced or contained, an increase in bad debts and credit loss provisions impacted the expense ratio.
Wapnick said, however, the business was showing improvement, and, for example, October rent collections came to 103 percent of the expected amount, while more leases were signed than in the same month in 2019.
Cash generation remained robust, and loan-to- value was at 42 percent, with the nearest covenant limit at 50 percent, providing sufficient headroom on the balance sheet.
In the residential portfolio, which mainly comprises flats, vacancies rose to 17 percent at the end of August, from 6.7 percent at the same time in 2019, and from 11 percent at the end of February.
Factors behind this were increased competition, and the impact of the pandemic on tenants.
The group’s residential tenants are mainly employed people, many of whom were affected by the pandemic in one way or another, such as through having to seek more affordable accommodation, sharing accommodation or leaving their flats to live with family.
Octodec was working to address the competition, such as, for example, by increasing the group’s online presence, said Wapnick.
In the office portfolio, the offices leased to government departments were performing well, while Wapnick believed there still remained good demand for the remaining approximately 50 percent of the offices, relatively to, for example, premium grade office space.
Attracting new tenants, reducing vacancies and portfolio consolidation would remain the focus in 2021, as was the optimisation of the balance sheet and ensuring a healthy cash flow.
The share price closed at R6.24 on the JSE yesterday, but the price has trended upward by 34 percent since October 1, when it closed at R4.90.