Octodec, the JSE-listed Real Estate Investment Trust (REIT) reported its interim results for the six months ended February 2025, noting a resilient performance across its Gauteng-based portfolio, despite a challenging market context.
The group’s diversified portfolio of 226 residential, retail, office and industrial properties including Killarney Mall (up for sale) and Woodmead Value Mart, are located in the major metropolitan areas of Tshwane and Johannesburg.
The portfolio, including an equity-accounted joint venture, has a lettable area of 1 504 601m2 and is valued at R11.3 billion.
Financial highlights
-Revenue grew 5.2% to R1.1 billion
-Core vacancies reduced to 13.7%
-Cash generated from operations up 25% to R270 million
-Distribution per share 3.3% higher at 62.00 cents
-Headline and diluted headline earnings per share (cents) up 4.7%
-Yield-enhancing solar projects rolled out at two key assets
-Pilot project Yethu City launched to high market demand with residential units 97% let
-The board of Octodec declared a cash dividend of 62.00000 cents per share
This represents a recovery from the group previous reporting period – a 7.4% decrease in attributable profit for the year ended August 2024, and a decline in headline earnings per share of 12.9 cents, due largely to challenging macroeconomic conditions and ongoing municipal service delivery issues.
The company’s properties were impacted by frequent power outages during the reporting period, with both Eskom and municipal supply failures disrupting commercial operations and contributing to higher vacancy rates.
Building on early signs of economic recovery, Octodec said it reduced vacancies and disposing of 10 non-core assets.
A highlight for the period was the completion of and successful launch of Yethu City in mid-February 2025. “This redevelopment pilot project exemplifies Octodec’s ability to address market needs by introducing quality, accessible co-living accommodation to the Pretoria CBD. The letting rate exceeded expectations, with the residential occupancy reaching 40.7% by end February 2025 and currently nearing 100%,” it said.
Commenting on the results, Jeffrey Wapnick, Octodec MD, said: “We are pleased to have grown our rental income and dividend despite a challenging operating environment, reflecting the stability of our portfolio and the effectiveness of our strategic initiatives.
“We are thrilled about the successful launch of Yethu City as part of our efforts to provide well-priced, quality accommodation and unlock new opportunities for growth and enhancement of returns.”
Yethu City offers 136 fully furnished rooms with an all-inclusive rent that covers essentials like WiFi, water, and electricity.
Octodec said its portfolio of retail shopping centres, anchored by a strong base of convenience centres, recorded core vacancies of 0.8%, when excluding Killarney Mall which is held for sale.
The portfolio achieved solid rental income growth of 6.2% to R91 million, reflecting management’s yield-enhancing actions, and robust demand for this retail category, it said.
Rental income from retail street shops rose by 1.4% on a like-for-like basis while the strategic disposal of properties with high vacancies supported an improvement in occupancy from 86.0% to 87.4%.
The group acknowledged the impact of macroeconomic challenges and infrastructure constraints on this retail segment – most notably the Lilian Ngoyi Street that is currently under repair in the Johannesburg CBD, which contributed to elevated core vacancies of 21.9% at these affected properties.
Its office portfolio, it said, showed some green shoots, recording encouraging like-for-like rental income growth of 6.4% to R151 million, when excluding a net lease adjustment applied in the comparative period.
Core vacancies improved slightly from 24.3% to 23.4%. Management continues to proactively manage underperforming assets through disposals and strategic conversions.
Octodec’s residential portfolio recorded above-inflation rental income growth of 5.1% on a like-for-like basis. Vacancies ended slightly above the comparative period at 8.4%, however were below the FY24 figure of 9.2%.
The Hatfield properties benefitted from pre-approval of NSFAS funded students and the enhanced amenities for students, recording a notable decline in vacancies of 3.1 percentage points. The introduction of the Yethu City co-living offering, aims to address affordability constraints and capture the vast demand for quality accommodation in this market.
The industrial portfolio consisting of smaller warehouses and light industry performed well, delivering rental income growth of 5.1% on a like-for-like basis and reduced vacancies of 8.7%.
The formation of the Government of National Unity (GNU) has lifted market sentiment and together with interest rate cuts has improved the operating backdrop, the group said. These developments have already supported disposal activity and offered relief to small businesses, while presenting opportunities to lower Octodec’s funding costs, improving the potential for value-accretive reinvestment, it said.
“However, heightened geopolitical risks, a material government lease termination, and uncertainty tied to the sustainability of the GNU, have prompted a more cautious outlook, Octodec stated.
Based on the economic outlook and caution surrounding geopolitical tensions, management has revised its guidance for growth in distributable income per share, to between 2% and 4% , while maintaining a minimum dividend pay‑out ratio of 75% of distributable income.
Founded by Alec Wapnick in 1956, Octodec derived its name from Octodecim, the Latin word for 18, representing its original 18 shareholders, including the Wapnick family, who remain core shareholders to this day. This includes CEO, Jeffrey Wapnick, and chairman, Sharon Wapnick.
Shares in Octodec have endured a tough start to 2025, down more than 9% in the year to date, but still up more than 6% over the past year and 114% over a five-year period.
