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Octodec delivers solid total returns

Posted On Friday, 19 October 2007 02:00 Published by eProp Commercial Property News
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Octodec today reported a total return for the year ended 31 August 2007 of 59%

Jeffrey WapnickOctodec Investments Limited, the leading property loan stock company listed on the JSE Limited with investments exceeding R2,1 billion, has once again produced strong growth in distributions to linked unitholders

“Favourable renewals of leases, strict expense control as well as favourable trading conditions have all contributed to the growth in distributable earnings. Net rental income before taking into account properties acquired and developed, recorded an increase of 15%,” says Octodec Investments Limited managing director Jeffrey Wapnick. Rental income and net rental income increased by 25.1% and 25.8% respectively.

The total distribution per linked unit of 106,2 cents (2006: 88,7 cents) represents an increase of 19.7% on that paid in the previous year.

Wapnick is confident that Octodec will continue to grow it earnings. “With the South African economic outlook remaining positive for property, management is optimistic that the company will continue to grow earnings on par with, if not better than, the market average,” he says.

Taking into account prevailing market rentals, occupation levels and capitalisation rates Octodec’s property portfolio increased in value by R239 million following a directors’ revaluation. This contributed to an increase in net asset value of 30.8%, to 1471 cents per linked unit.

During its second interim period, Octodec acquired and took transfer of six properties for a total consideration R96,7 million. These purchases include Elephant House, Inner Court and Anderson Place which are all in the Johannesburg CBD and two light industrial properties situated in Johannesburg. Rentmeester, an office block in Pretoria, was purchased for a consideration of R48 million, and was transferred after the close of the financial year on 19 September 2007.

Octodec’s portfolio of retail properties comprises five quality shopping centres. It continued to enjoy strong growth in earnings due to favourable renewals and contractual rental escalations. The growth in rental income from this portfolio amounts to 11%.

“Octodec continues to unlock value from its Johannesburg and Pretoria CBD portfolios through redevelopment and refurbishment,” points out Wapnick. The conversion of Registry House from offices to multi-use retail and light industrial facilities was completed at the year end, at a cost of R9,9 million. The Tiny Town residential development, which is situated adjacent to the Union Building, is due to commence in March 2008. The total cost of the project is in excess of R100 million.

The Sildale Industrial Park development was completed during the year at a cost of R13,1 million. The letting of these light industrial units is progressing well and due to the strong demand the development of additional units is planned. 

In line with the strategy to invest in Premium Properties Limited, Octodec acquired 549,975 linked units at an aggregate cost of R12,98 per linked unit.

During the period R199 million was raised through the issue of 10,952,903 units were issued at a price of 1851 cents which includes a notional distribution pre-payment of 25 cents. These units were placed with selected institutions and investors. An amount of R2,7 million was received as a prepaid distribution.

In the short term the proceeds from the unit issue, which have been earmarked to fund redevelopment and expansion opportunities, will be utilised to reduce borrowings and will result in an interest saving at a rate of approximately 11.5%. The proceeds will be utilised to fund redevelopment and expansion opportunities.

Following the receipt of the proceeds from the issue of linked units, the borrowings decreased to R524,2 million. Octodec’s gearing ratio at the end of the period under review was a notably reduced 24% as against 34% at 31 August 2006. The company has facilities in excess of R220 million available to fund future cash flow requirements.

Interest rates in respect of 86% of borrowings at 31 August 2007 have been fixed. The weighted average interest rate at 31 August 2007 was 10.6% with fixed borrowings maturing at various dates ranging from November 2007 to November 2010.

The final distribution of 52,2 cents per linked unit will be paid to Octodec linked unitholders on Monday, 19 November 2007.

Last modified on Wednesday, 23 April 2014 11:32

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