Pressure on rental income growth, the lag effect of the let-up period at recent developments and higher finance charges negatively impacted on JSE-listed real estate investment trust Octodec’s results for the six months ended February 28.
“The political and economic uncertainty experienced during the period did not lend itself to a supportive operating environment. Our approach was, therefore, to focus on core property fundamentals and position ourselves to provide sustainable value creation,” CEO Jeffrey Wapnick said in a statement on Monday.
He pointed out that residential vacancies, which saw significant competitive pressures, specifically in Hatfield, was a key focus area for the group.
“Marketing efforts and an enhancement of the tenant offering to address the increased competition are bearing results with a reduction in residential vacancies achieved,” he said.
Vacancies in this sector decreased from 7.2% as at August 31, 2017, to 3.7% post February 28.
Finance costs for the period amounted to R213.9-million, an increase of 7.5% compared with the prior period. The all-in weighted cost of borrowings was maintained at 9.2% a year, while the group’s loan-to-value was at 37.1% at period end.
Despite the continued sluggish local economy, Octodec’s R12.9-billion portfolio, comprising 309 properties, realised like-for-like growth of 3.2% in rental income and had a total core occupancy level of 89.2% for the period under review.
Octodec continued to optimise its portfolio by focusing on the completion of certain developments and disposing of noncore or underperforming assets.
Ten noncore or underperforming assets were sold, with six transferred during the period, returning R43.8-million.
The remaining four properties, totalling R44.8-million, are expected to transfer during the 2018 financial year.
Wapnick noted that the local operating environment has started to show signs of recovery, supported by better market sentiment following recent political changes.
“Our expectations for flat distribution growth for the full year have not changed; however, we should see positive growth in the 2019 financial year,” he said.
A distribution of 101.7c a share was declared for the six months to February 28.