Octodec looks to subdued growth in tough market

Posted On Thursday, 28 April 2011 02:00 Published by eProp Commercial Property News
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Killarney Mall owner Octodec has posted a small drop in distributions to 65c for the six months to February, from 65.1c in the first half of last year.

Property-Housing-ResidentialThe property loan stock company said this week that challenging market conditions had resulted in a slow take-up of vacant space and exerted further downward pressure on rentals.

New tenants were reluctant to sign up for space in the tough economy.

It said that although the local economy had emerged from its recession, it was anticipated that growth would remain subdued in the short to medium term.

Property expenses increased to 48% from 42.5% of revenue, which was mainly attributable to an increase in utilities and assessment rate expenses, as well as repairs and maintenance costs.

The company said although its leases allowed for the recovery of increased utilities and assessment rates from tenants, that did not have a negative e ffect on new rentals on expiry of leases.

Distributable income was positively affected by the reduction in the prime interest rate in the period.

However, that was offset by the increased costs of funding on the interest rate swaps entered into at a premium to the weighted average floating interest rates, to fix interest rates in a low interest rate environment.

Octodec said it continued to unlock the value of its Johannesburg and Pretoria central business district portfolios by redevelopment and refurbishment.

Various properties were upgraded during the period at a total cost of R41.8 million, which included Killarney Mall and Reliance, a complex of industrial units.

Of concern is that Octodec’s total vacancy rate is sitting at 17.8%, but the company said a large percentage of the vacancies were in respect of properties acquired with large vacancies and where little or no consideration was paid for the vacant space.

Last modified on Tuesday, 22 April 2014 18:40

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