Johannesburg - Listed property firm Octodec Investments is considering entering into new markets and strategic partnerships that will support its growth.
Jeffrey Wapnick, the managing director of Octodec, said yesterday that Octodec might do some off balance sheet developments to ensure projects were not dilutionary and undertake buy-backs when the yields were more palatable to shareholders.
Wapnick said Octodec regularly received approaches because it was a good brand in terms of its product and its ability to manage its assets.
He said two residential developments were in planning phase at a cost of R240 million, but stressed these would only be undertaken if they met their hurdle rate of return of 9 percent.
This is a reference to the planned redevelopment of Reinsurance House in Johannesburg and the Van Riebeeck Medical Building in Pretoria.
Octodec was planning to convert the Van Riebeeck Medical Building in the Tshwane central business district (CBD) into 195 residential units and Reinsurance House in Johannesburg’s CBD into 175 residential units.
Wapnick said unless they could find a substantially cheaper design and better yields and the share price moved positively, these were difficult projects to get off the ground and it needed to look at alternatives.
He said Octodec’s loan to value was currently just more than 38 percent and it would be difficult to build these projects and stay within their stated loan to value objective of 40 percent.
Wapnick said it was also too expensive to issue paper with the current big disparity between Octodec’s current share price of R22 and net asset value of R29.
Anxiety
“You do cause shareholders anxiety when there are dilutionary yields,” he said.
Wapnick added that Octodec had been focused on Johannesburg and Pretoria and it was looking to expand the geographical area in which it operated because of the difficulty of building two residential blocks at the same time and flooding the market.
He said Octodec was more relaxed about where it operated and Cape Town was always an option, but the pricing was so high it was difficult to break into that market. He did not want to totally reject the possibility of expanding offshore.
Octodec yesterday reported a 6.5 percent growth in distributions a share to 201.5c in the year to August from 189.2c in the previous year. The R12.3 billion portfolio, comprising 324 properties, realised like-for-like growth of 5.3 percent in rental income. Contractual revenue grew by 6.7 percent to R1.74bn from R1.63bn. Shares in Octodec remained unchanged on the JSE yesterday to close at 21.67.
BUSINESS REPORT