Octodec reports strong H1 growth, aims for geographic diversification

03 May 2017

JSE-listed real estate investment trust (Reit) Octodec achieved distribution growth of 6.5% year-on-year to 104.8c a share for the six months to February 28, despite low domestic economic growth.

FD Anthony Stein said that the strong distribution growth was underpinned by the Reit managing to increase its like-for-like rental income by 5.5%, with its rental income from offices showing the strongest growth of 8.2%.

“We had fairly steady growth at a topline revenue level; we maintained our expense ratio at 29% to income, our finance costs came down significantly and, overall, the vacancies did not increase significantly,” Stein explained.

However, its residential portfolio showed lower growth in like-for-like rental income of 3.8%, which was mainly attributable to lower escalations of rentals in Hatfield and the Pretoria central business district (CBD), which, to date, had been strong student nodes. This trend was expected to continue for the remainder of the financial year.

With a portfolio of 316 properties, valued at R12.7-billion, the Reit aims to continue developing further properties, with four projects under construction in the Pretoria and Johannesburg CBDs.

Meanwhile, he explained that while the company focuses largely on CBDs, as it “is a place that continually holds demand from a retail perspective”, it is also seeking diversification to manage its risk.

Speaking about the wider economic environment, Wapnick said the company remained committed to investing locally, rather than abroad.

“We are currently considering opportunities outside our traditional focus in Gauteng that will increase our geographic diversification. While these opportunities will increase our geographic diversification, they are in market sectors in which we have extensive experience and expertise,” he said. 

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