Octodec Investments today announced its interim results for the six months ended 28 February 2014. Octodec primarily invests in the retail, industrial and office property sectors, with a growing exposure to residential property.
Commenting on the interim results, Jeffrey Wapnick, Managing Director said: “Octodec outperformed expectations delivering a 12,6% growth in distributions even though trading conditions and consumer confidence remained subdued.
“The increase in revenue was mainly due to contractual escalations and improvements achieved through, letting efforts, the recovery of utility and assessment rate charges as well as an increased focus on energy management initiatives.”
Rental income and net rental income increased by 8,2% and 12,2% respectively, compared to the prior interim period. Due to greater efforts on credit control, bad debt write-offs and provisions during the period were 1% of total tenant income and arrears and doubtful debt provisions remained at acceptable levels.
Vacancies, including properties held for redevelopment, amounted to 15,4% of total lettable area compared to 13,6% at year end. As anticipated, a number of properties under development or those recently upgraded, attracted high vacancies. Octodec was successful in letting a number of properties that had been vacant for a considerable period.
“We are very proud to have achieved a 0,3% vacancy rate for our retail shopping centres. Killarney Mall, the company’s flagship centre maintained vacancies at below 2% of gross lettable area following a successful recent upgrade and delivered an extremely pleasing result for the period contributing significantly to the growth in distributions,” added Wapnick.
During the year, Octodec completed three major projects with two projects still under construction. The total cost of the projects is approximately R189,4 million of which R110,9 million had been spent by 28 February 2014.
The projects include the redevelopment of the abandoned and dilapidated Medical City in the Johannesburg CBD into a college with residential accommodation which was occupied in November 2013; the upgrade of Time Place, a residential property in the Pretoria CBD as well as various upgrades and the construction of additional units in the Johannesburg CBD.
Octodec is upgrading a number of residential properties in the Johannesburg CBD, including Essenby, and is also completing the redevelopment of Bosman Place, at a cost of R106,4 million. The fully let initial yield is expected to be 8,4% following completion in 2015.
During the year Octodec increased its investment in associate company IPS Investments to 50%. IPS continued to deliver strong growth with profits earned from the associate increasing 62,3% to R19,2 million. The growth achieved by IPS was positively impacted by the improved occupancy levels achieved at most of its assets.
Octodec’s loan to value ratio at the end of the period improved to 33,8% of the investment portfolio’s total value from 35,9% at year end. Interest rates in respect of 57,6% of borrowings were hedged, maturing at various dates in 2017 and 2018. The average weighted interest rate of all borrowings is 8,4% per annum, with unutilised banking facilities exceeding R228 million.
“We have maintained a strong balance sheet and the significant headroom available through our existing facilities places us in a good position to execute further yield-enhancing upgrades, redevelopments and acquisitions opportunities across our portfolio.
“We expect growth in the local economy to remain subdued and barring unforeseen events, anticipate that the percentage growth rate in distributions per linked unit for the second half of the year will be in line with what we achieved in the first half,” Wapnick concluded.
A dividend of 88,60 cents (2013: 78,70 cents) per linked unit (out of income reserves) has been declared for the period 1 September 2013 to 28 February 2014.