PROPERTY: Octodec Investors Benefit from Distribution Growth
Recent Gauteng Business News
Octodec Investments Limited today announced a distribution of 65.1 cents per linked unit for its six-month interim period to 28 February 2010, representing an increase in distribution of 4,7% from the corresponding prior period.
Octodec’s total investments exceed R2,6 billion while the company’s rental income increased by 7,6%.
Managing director of Octodec Investments Limited, Jeffrey Wapnick, notes that while distribution growth was assisted by the reduction in the prime lending rate during the period, however the prevailing tough market conditions served to increase property expenses which partially offset the respectable gains made. Net property income increased by 3,1%.
“The retail sector continued to experience tough trading conditions during the period which has resulted in the slow leasing of vacant retail space and further downward pressure on rentals,” explains Jeffrey Wapnick.
While the effects have been most acute in the retail sector, the overriding difficult market environment has had a similar impact in all sectors. Wapnick notes that these trading conditions are expected to prevail for the remainder of the year, with Octodec’s second half distributable earnings expected to be on par with, or slightly better than, those of the first half.
Wapnick reports that, in spite of the challenging market conditions, Octodec reduced its overall vacancies during the six-month period by over 2% of gross lettable area.
“Retail vacancies are mainly attributable to smaller line shops. In other sectors, the highest percentage of vacancies was in respect of properties acquired where little or no consideration was paid for the vacant space,” says Wapnick. He notes that, in a market which is expected to show signs of recovery over the next 12 to 18 months, these vacancies represent valuable opportunities from which Octodec will ultimately benefit.
Strategically growing and enhancing its quality property portfolio, Octodec continues to pursue investment and redevelopment opportunities.
During the period Octodec unlocked value from its existing Joburg and Pretoria CBD properties, undertaking refurbishments and upgrades of various properties, including Killarney Mall, Waverley Plaza and Inner Court, for a combined investment of R7,5 million.
Octodec also purchased three properties for an aggregate of R59 million, comprising two properties housing McCarthy Motor dealerships and a light industrial property in Eloff Street, Joburg.
Income received from Octodec’s associate company IPS increased to R7,2 million due to the strong performance of the portfolio. Wapnick notes that these levels are likely to dip for the next year as IPS absorbs the take up of some 700 residential units which it is adding to its portfolio valued at over R1 billion which includes 2,732 residential accommodation units. These will be located mainly in its developments at Kempton City in Kempton Park and Lara’s Place situated in the Johannesburg CBD. However, the rental growth from these two developments is expected to flow through to IPS and Octodec in 2011 and beyond.
Resulting from acquisitions during the period, the purchase of 919,819 Premium Properties Limited shares and developments undertaken, Octodec’s gearing increased marginally during the period from 31.1% to 32,4%. Interest rates in respect of 53,8% of borrowings at 28 February 2010 were fixed at an average interest rate of 11,7%, maturing at various dates ranging from April 2010 to October 2018.
“Octodec continues to benefit from good access to debt and financial facilities, positioning it ideally to pursue suitable investments which will ensure the strategic growth and enhancement of its portfolio,” says Wapnick.
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