JSE-listed Octodec delivered a 7.7% hike in distribution to 189.2c a share for the 12 months to August 31, in the first full year as an expanded real estate investment trust since having merged with Premium Properties.

Octodec, which had an R11.4-billion portfolio comprising 330 properties, reported improved performance from each of its residential, retail, shopping centre, industrial and office property sectors – despite tough business conditions and muted economic growth.

The better-than-expected residential market strength, tight cost control, portfolio enhancements and reduced vacancies underpinned growth in earnings for the year under review, Octodec MD Jeffrey Wapnick said on Wednesday.

The group’s total rental income surged to R1.28-billion during the 12 months under review, from R395-million in the prior year, with the office, retail and residential divisions outperforming.

Rental income from the office sector increased from R73-million in 2014 to R300-million in 2015, with retail increasing from R95-million to R361-million and residential from R29.6-million to R381-million during the period under review.

Rental income from the shopping centres sector ticked up from R123.6-million in 2014 to R129-million in 2015, while the industrial sector posted an increase from R73.5-million last year to R108.4-million in the 2015 financial year.

Octodec’s revenue for the 2015 financial year more than doubled to R1.6-billion, from R537.8-million the year before, owing to the merger with Premium, contractual escalations, improved letting and an increase in the recovery of utility and assessment rate charges.

Operating profit increased from R247-million in 2014 to R823.9-million in 2015, with profit for the year rising from R386-million in 2014 to R1.3-billion.

Vacancies, including properties held for redevelopment, improved from 16.7% to 14.8% year-on-year, with core vacancies, which excluded properties held for redevelopment, narrowing from 11.5% in 2014 to 8.8% of total lettable area in 2015.

Industrial vacancies decreased from 13.7% to 9.3% and residential vacancies from 9% to 5.3% during the period under review.

ACQUISITIONS
During the financial year, Octodec acquired seven smaller properties for R109.4-million, including the R35.5-million purchase of office block Reinsurance House, in the Johannesburg central business district (CBD), which would be converted into residential units at a cost of R100-million with the fully let initial yield expected to be 8.5%.

Further, Octodec entered into a R10.2-million 50:50 joint venture (JV) with Renprop to develop a new residential block in Sunninghill.

The R156-million development, The Manhattan, would comprise 180 residential units upon completion late in 2016, with a fully let initial yearly yield expected at 9.5%.

“The aim of this JV is to explore a different market segment with a reputable partner, allowing Octodec to diversify into yield-enhancing opportunities outside of the CBDs,” Wapnick explained.

Octodec also disposed of three noncore properties during the year for R15.9-million.

PROPERTY DEVELOPMENTS
Meanwhile, the group spent more than R288-million of the R681-million set aside for four major developments.

The R347.4-million, 400-unit Centre Forum, opposite the new Tshwane House municipal development in the Tshwane CBD, would be completed by March 2017 at a fully let yield of 8.1%.

In addition to the residential component, the development would comprise ground-floor retail space and parking.

Another mixed-use development, the R146.4-million One on Mutual, adjacent to Church Square in the Tshwane CBD, was on track for completion in April 2016 and would boast 142 residential units, ground-floor retail space and parking, with a fully let yearly yield of 7.6%.

Meanwhile, Frank’s Place, in the Johannesburg CBD, was completed in May at a cost of a R130.1-million. The 225-unit residential building was expected to deliver a fully let initial yield of 8.1%.

Octodec also completed the retail redevelopment of Silver Place, a mixed-use property in Silverton, Tshwane, for R57.3-million.

“Looking ahead, our redevelopments, weighted towards the defensive residential sector, should enhance the quality of the portfolio and deliver higher value for shareholders,” Wapnick added.