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Octodec navigates difficult first half, expects full year distribution growth of 6%

Posted On Tuesday, 03 May 2016 08:10 Published by
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JSE listed REIT Octodec today announced a reasonable half year performance in a toughening business environment with muted economic growth.


The period was marked by the successful upgrading of a number of properties which, together with a proactive approach to letting, resulted in an increase in rental income.   

The portfolio comprising 324 properties realised like-for-like growth of 5% in rental income. This was achieved through Octodec’s hands-on management approach, tight cost controls and portfolio enhancements. Revenue increased 5,7% for the period mainly due to contractual escalations, improved letting and an increase in the recovery of utility and assessment rate charges.  

Jeffrey Wapnick, Managing Director of Octodec, commented: “ The portfolio performed in line with our expectations , delivering a 5,7 % increase in revenue for the six month period. These results are reflective of the challenging economic environment and although we focus sed our efforts on cost control, our first half earnings were muted by rising interest rates , the phased take up of un its at Frank’s Place and investment in a number of projects . T he b enefit of these projects will be seen in the short to medium - term. ”  

Octodec’s continued focus on cost control saw the ratio of net property expenses to rental income decrease to 29,7% (31 August 2015: 30,4%) whilst bad debt right offs and provisions remained low at just 1% of total tenant income.

The mothballed Van Riebeeck Medical Building in the Tshwane CBD was acquired for R29 million and will be converted into 195 residential units at a cost of R110 million. In recent years, several other properties with high vacancies were acquired including Centre Walk, Fedsure and Re-insurance. These properties offer significant redevelopment opportunities, with resulting value being realised over time.

To highlight this, Wapnick explained: “T he recent redevelopment of Centre Walk in Tshwane saw us secure a 9365 m 2 government office lease effective 01 March 2016 at a total monthly rental of R870 800 . ”   

Octodec had three major projects worth approximately R708,9 million under construction during the period with R278,6 million spent by 29 February 2016.  

1 on Mutual, a R152,7 million mixed-use development situated adjacent to Church Square in the Tshwane CBD will consist of 142 residential units, ground floor retail space and parking. This project is timed for completion in July 2016. “ We are excited about the launch of this development as it offers tenants a more upmarket look and feel with excellent retail facilities anchored by Pick n Pay,” commented Wapnick.  

Last modified on Tuesday, 03 May 2016 09:20
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