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Octodec on strategic initiatives for 2024

Staff Writer
Estimated reading time: 2 minutes

Octodec Investments Limited, a Johannesburg Stock Exchange (JSE)-listed Real Estate Investment Trust (REIT), announced robust financial results for the full year ending August 31, 2023.

The company reported a 3.3% increase in revenue to R1,995.1 million compared to R1,930.5 million in 2022. Additionally,

Octodec declared an increased dividend per share of 135 cents, up from 130 cents in the previous fiscal year.

Despite facing a challenging operating environment, the group successfully limited property cost increases to 5.3% year-on-year.

Distributable income before tax experienced a marginal decrease of 1.3%, primarily attributed to elevated administration and corporate costs.

Residential Portfolio Shines

Octodec’s residential portfolio, constituting 34% of the total income and 27.3% of the portfolio by Gross Lettable Area (GLA), was a standout performer.

The residential segment saw a significant 10.2% year-on-year income growth, driven by excellent occupancy levels and increased rentals.

Residential vacancies, excluding The Fields, reached a near pre-Covid level of 5% by the end of the fiscal year.

Retail and Commercial Success

The retail shopping centers in Octodec’s portfolio continued to perform exceptionally well, with a 5.3% increase in rental income year on year.

Vacancies in this sector reached an all-time low of 0.4%, excluding Killarney Mall, which had slightly higher vacancies.

Jeffrey Wapnick, Octodec MD, expressed pride in the residential and commercial leasing teams, stating,

“These results… suggest that Tshwane and Johannesburg remain in demand and bustling with activity for residents, office workers, and retail customers alike.”

Industrial and Office Segments

While the industrial portfolio saw a 3.8% rental growth, vacancies increased from 6.8% to 8.7%, mainly due to vacant spaces in Pretoria West and Silverton.

Octodec said it remains optimistic about the industrial sector, expecting improvements in occupancies going forward.

Core office vacancies remained stable, but rental income reduced by 5.3%, attributed to negative government rental reversions.

However, renewed government leases at a 6% escalation plus operating costs bode well for FY2024.

Balance Sheet Management and Dividend

Octodec showcased a strong focus on collections, averaging just under 99% for the period. The company successfully refinanced all loans maturing in the current year and FY2024.

Despite challenges, the balance sheet was strengthened, and liquidity improved.

The Board declared a final dividend of 75.0 cents per share, resulting in a total dividend for the year of 135.0 cents per share, a 3.8% increase from the prior year.

Prospects and Caution

Management highlighted an increase in leasing activity during the year, emphasising the attractiveness of Octodec’s assets to prospective tenants.

Cognizant of high inflation, interest rates, and increasing energy costs, the company said it remains cautious in its approach to developments, focusing on maintaining a healthy balance sheet and providing steady distributions to shareholders.

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