Octodec Investments has lowered its projected growth in distributable income per share from 3-5% to 2-4%, citing geopolitical uncertainty, local economic pressures and the City of Tshwane’s planned office space exit.
While improved sentiment from the GNU and rate cuts have boosted conditions, the Lilian Ngoyi explosion, where one of its retail centres is located, unemployment and rising geopolitical risks have led to a more cautious outlook, the group said in its results for the six months ended February.
However, the group is maintaininga minimum dividend payout ratio of 75% of distributable income.
The Woodmead Value Mart and Waverly Plaza owner said it has secured a 20% interim insurance payout for the Lilian Ngoyi Street damage, with the remainder still under negotiation. The claim will remain active for up to three years as repair work continues. The street suffered serious damage from a gas explosion in July 2023.
Core vacancies reduced to 13.7% from 14.9%, with the largest reduction in shopping centres, driven by the reletting of space at Woodmead Value Mart.
Vacancies in the Johannesburg CBD, where Octodec has the largest concentration of mothballed spaces, increased to 22.1% from 21.6% in August.
“Operating in the Joburg CBD remains challenging, as poor municipal management and ongoing service delivery failures worsen the already tough economic climate for businesses,” the group said.
Octodec has stepped in to fill the gaps by allocating additional resources and covering services that should be provided by the local government, it said.
Octodec reported a 5.2% increase in revenue to R1.1bn. Cash generated from operations rose 25% to R270m, and distribution per share increased by 3.3% to 62c.
The group’s total borrowings amounted to R4.4bn at the end of February and it reduced its loan to value to 38.5% from 39.2%, which is below the industry average of 50%. In November, R970m in funding was refinanced at better margins over three to four years and talks are under way to refinance R650m of debt maturing in August 2025.
The group sold ten properties as part of its portfolio recycling strategy and introduced solar projects at two key assets to boost returns. In addition to this, the pilot project Yethu City launched to strong demand, with 97% of its residential units already rented out, it said.
The group said it looks forward to building on the early success of Yethu City, as it continues to repurpose underutilised assets to drive future returns. With a cautious stance on interest rates, it remains focused on balance sheet discipline and recycling proceeds from noncore asset sales into high-yield investments or debt reduction.
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