Octodec maintains dividend and works on value-creating opportunities
Octodec Investments distributable income before tax decreased by 7% to R220.3 million, but it maintained the interim dividend at 60 cents as the REIT navigated tough markets in Tshwane and Johannesburg and the low interest rate environment.
However, dividend guidance was not provided for the second half due to the uncertainty around the elections.
However, if all things being equal from the first half, the residential, commercial, industrial and retail property group should at least be able to repeat the interim dividend at year-end, financial director Anabel Vieira said yesterday.
“We are pleased to have still maintained a strong capital and liquidity position and loan-to-value ratio, as well as a solid and diversified funding base, which will protect our portfolio and allow us to undertake more conversion and development opportunities,” she said.
Group income grew 3.1%, largely driven by higher rentals in the residential portfolio in an environment of weak economic growth, record unemployment and high inflation and interest rates.
Managing director Jeffrey Wapnick said they were pleased to have grown income and been able to retain the dividend in these challenging market conditions.
On the outlook, he said a focus value-accretive conversion opportunities were expected to bear fruit with the launch of HealthConnect, and the commencement of the construction work of Yethu City in response to strong demand for quality healthcare and residential facilities in the Tshwane CBD.
The 7% lower distributable income before tax to R220.3m was mainly due to higher property and administration expenses across the portfolio.
The Fields in Hatfield, catering mainly for students, saw a resurgence in demand following the increase in NSFAS allowances in 2024, marking a notable decrease in vacancies from 23% to 7% by April 2024.
However, increased vacancies in residential buildings near Lilian Ngoyi Street in Johannesburg tempered overall sector performance.
The retail shopping centre portfolio performed well. On a like-for-like basis, rental income increased 1.7%; however, this growth was impacted by a small increase in vacancies at Killarney Mall.
Wapnick said all options were being considered for the mall, including changing its office spaces to shared accommodation, or medical suites.
Excluding Killarney Mall, retail centre core vacancies remained below 1%.
Wapnick said they were excited about their recently announced developments, including the medical suites at HealthConnect adjacent to Louis Pasteur Hospital in Tshwane, as well as the conversion of vacant office space into residential accommodation.
Other initiatives included enhanced student facilities at The Fields and investing in alternative energy solutions to mitigate load shedding.
Octodec recently approved the conversion of a vacant office building in the Tshwane CBD into residential accommodation.
The development will be known as Yethu City on Sisulu, and would offer a slightly smaller and more affordable product relative to Octodec’s traditional residential units, with shared amenities such as living areas, kitchens and bathrooms.
The conversion, estimated to cost R44m, was expected to be completed by December 2024, with occupation in January 2025.
Octodec’s office portfolio performance, while challenging, was stable. Rental income fell 1.4% on a like-for-like basis.
Wapnick said the improved occupancy at their residential buildings should continue to impact positively on Octodec’s residential sector performance.
Value-added measures would continue to be introduced, including backup power and water to tenants during outages. The redevelopment and repurposing of other properties to improve occupancy and grow rental income also remained a focus.
BUSINESS REPORT