Octodec Investments Limited · JSE:OCT
Octodec Investments — FY2023 Earnings Presentation
48 slides from Octodec Investments's earnings presentation, Nov 1, 2023
Slide 1: Reviewed condensed annual results for the 12 months ended 31 August 2023
OCTODEC INVESTMENTS LIMITED 0 Reviewed condensed annual results for the 12 months ended 31 August 2023
Slide 2: Agenda
AGENDA 1 Octodec at a glance 2 Our portfolio performance: residential 3 Our portfolio performance: commercial 4 Financial results and capital management 5 Outlook 6 Questions and answers 7 Appendices Dans Place DAN’S PLACE
Slide 3: Octodec at a glance
OCTODEC AT A GLANCE THE FIELDS
Slide 4: Octodec at a glance: What, How, Why
OCTODEC AT A GLANCE How City Property’s inner-city know-how and experience provides us with our What competitive advantage. It constitutes our collective experience, knowledge Our property portfolio is and culture. It also includes diversified and well balanced the processes and across all property
Slide 5: Performance highlights
OCTODEC AT A GLANCE – PERFORMANCE HIGHLIGHTS Cash generated Distributable income after tax from operating activities Rental income Profit for the year (REIT funds from operations) before dividend payment (R’million) (R’million) (R’million) (R’million) 3.3% 0.9% (2.2%) 14.3% R1 995.1 R610.5 R455.8 R4
Slide 6: Rental income analysis
OCTODEC AT A GLANCE – RENTAL INCOME ANALYSIS Rental income by sector Geographical analysis of rental income 31 August 2023 31 August 2023 Tshwane CBD (2022: 36.1%) 4.5% 4.2% Johannesburg CBD Residential 4.5% (2022: 18.8%) 7.1% (2022: 31.7%) 5.0% Tshwane other Retail – (2022: 12.6%) 18.7% 34.0% stree
Slide 7: Our portfolio performance: residential
OUR PORTFOLIO PERFORMANCE: RESIDENTIAL JEFF'S PLACE
Slide 8: Residential
RESIDENTIAL As at As at 31 Aug 2023 31 Aug 2022** GLA (m²) 418 094 415 490 Number of properties 65 65 Number of tenants 8 959 8 929 Number of residential units 9 243 9 243 Johannesburg (%) 36 36 Tshwane (%) 64 64 Rental income (R’million) 510 463 Rental income growth (%) 10.2 7.6 Rental income growt
Slide 9: Residential [continued]
RESIDENTIAL [CONTINUED] Improvement in vacancies (excluding The Fields) The Fields Vacancies decreased from 7.0% in FY2022 to 5.2% in Octodec’s largest asset, situated in a highly competitive student area, where vacancies increased from 7.1% in FY2023 FY2022 to 23.7% in FY2023 • Increased vacancies
Slide 10: Residential [continued]
RESIDENTIAL [CONTINUED] Demand for quality accommodation remains • Quality, secure accommodation with recreational facilities and free Wi-Fi • We have refurbished the common areas and amenities at Vuselela Place • Similar refurbishment planned for Ricci’s Place for FY2024 • Implementing new recreati
Slide 11: Our portfolio performance: commercial
OUR PORTFOLIO PERFORMANCE: COMMERCIAL CENTRE WALK
Slide 12: Retail – shopping centres
RETAIL – SHOPPING CENTRES As at As at 31 Aug 2023 31 Aug 2022** GLA (m2) 97 700 97 132 Rental income (R’million) 183 174 Rental income growth (%) 5.3 5.9 Rental income growth (like for like) (%)* 5.3 4.6 Total vacancies (% of GLA) 7.0 7.7 Core vacancies (% of GLA) 6.8 7.4 * Excludes the impact of di
Slide 13: Retail – shopping centres [continued]
RETAIL – SHOPPING CENTRES [CONTINUED] Tshwane: The Park, Waverley Plaza, Gezina, and Blaauw Village (50% held JV) • Strong performance from all neighbourhood convenience shopping centres Blaauw Village • 99.6% combined occupancy • 99.9% occupied at 31 August • 5.3% combined rental income growth • Ne
Slide 14: Retail – shopping centres [continued]
RETAIL – SHOPPING CENTRES [CONTINUED] Johannesburg: Woodmead Value Mart Johannesburg: Killarney Mall • 5.9% rental income growth • Rental income increased by 5.0% • Currently 100% occupied • Continued focus on tenant mix • A centre renowned for its high calibre tenant mix, authentic brands, and grea
Slide 15: Retail – shops
RETAIL – SHOPS As at As at 31 Aug 2023 31 Aug 2022** GLA (m2) 342 712 356 723 Rental income (R’million) 352 359 Rental income growth (%) (2.0) 3.0 Rental income growth (like for like) (%)* 1.2 1.8 Total vacancies (% of GLA) 21.4 20.6 Total core vacancies (% of GLA) 16.6 17.8 * Excludes the impact of
Slide 16: Retail – shops [continued]
RETAIL – SHOPS [CONTINUED] Prime CBD properties and retail Continued improvement Strategic capital projects • Still in demand and well let The following new tenants took occupation and are • Completed the Shoprite development in the Tshwane • Offers more growth opportunities than traditional trading
Slide 17: Offices
OFFICES As at As at 31 Aug 2023 31 Aug 2022** GLA (m2) 456 790 465 263 Number of tenants 1 532 1 543 Let to Government (% of total rental 53.8 56.7 income from offices) Other (% of total rental income from offices) 46.2 43.3 Office space held for development/mothballed 14.8 14.5 (opportunities to se
Slide 18: Offices [continued]
OFFICES [CONTINUED] Government and Parastatals Smaller offices Strategic capital projects • We continue to receive enquiries from Government • There is still demand for smaller offices • We continue to explore value adds such as Wi-Fi, and Parastatal departments for additional space • Smaller units
Slide 19: Industrial
INDUSTRIAL As at As at 31 Aug 2023 31 Aug 2022** Total GLA (m2) 213 665 222 852 Number of tenants 348 371 Rental income (R’million) 106 102 Rental income growth (%) 3.8 (4.3) Rental income growth/(reduction) 8.6 (2.1) (like for like) (%)* Total vacancies (% of GLA) 9.2 7.2 Core vacancies (% of GLA)
Slide 20: Industrial [continued]
INDUSTRIAL [CONTINUED] Small and medium-sized industrial parks with mini units catering for start-up and small businesses • Affordable rental options • Security and access control to industrial parks • Majority of renewals achieving escalations of between 6% and 8% • Arrears are stable and under con
Slide 21: Vacancies by sector
VACANCIES BY SECTOR Total vacancies (%) Core vacancies (%)* 38.5 38.1 23.7 23.6 21.4 20.6 17.8 16.6 31 August 2023 31 August 2023 9.2 8.7 7.0 7.7 7.2 7.0 7.4 7.0 6.5 6.8 6.8 6.5 31 August 2022** 31 August 2022** Offices Retail: Retail: Industrial Residential Offices Retail: Retail: Industrial Reside
Slide 22: Lease expiry profile
LEASE EXPIRY PROFILE By rental income % By GLA m² (%) August August August August August August 2028 and August August August August 2028 and 2024 2025 2026 2027 beyond 2024 2025 2026 2027 beyond Vacant Total Sector Residential 99.8 0.2 – – – 93.0 0.5 – – – 6.5 100.0 Commercial Retail Street shops 4
Slide 23: Lease expiry profile [continued]
LEASE EXPIRY PROFILE [CONTINUED] • Majority of leases are typically of a short-term nature, with lease periods of 12 months. Typical of residential and small to medium-sized enterprises • Profile in line with historical trends and expectations • Non-national tenant leases typically one to five-year
Slide 24: Update on leases > 3 000m² that expired pre-August 2023
UPDATE ON LEASES > 3 000M² THAT EXPIRED PRE-AUGUST 2023 Building Tenant Lease expiry GLA (m²) Renewal status 28 Church Square National Prosecuting March 2023 5 488 Renewal offer for a three-year lease made to tenant at an Authority inflation-related escalation in year one, and an escalation of 6% pe
Slide 25: Leases > 3 000m² expiring FY2023/24
LEASES > 3 000M² EXPIRING FY2023/24 Building Tenant Lease expiry GLA (m²) Renewal status CCMA Place CCMA September 2023 3 598 Lease extended for eight months at a 6% escalation while the tenant is finalising their tender process Marlborough CCMA October 2023 5 800 Lease extended for eight months at
Slide 26: Reversions by sector
REVERSIONS BY SECTOR New lease Renewal reversion Reversion Sector Area m2 % Area m2 % Commercial Retail – street shops 19 313 (4.5) 72 608 (10.0) Retail – shopping centres 1 648 1.1 15 901 1.8 Offices 7 818 (2.4) 77 828 (2.6) Industrial 14 575 6.4 63 909 5.4 Total commercial (GLA) 43 354 (1.7) 230 2
Slide 27: Collections
COLLECTIONS Total collections as at 31 August 2023 Collected Collected to billed YTD (%) R2.2 bn (2022: R2.2 bn) 99.0% Billed R2.2 bn Commercial (2022: R2.1 bn) Residential 98.5% Collected to billed% 98.9% (2022: 101.2%) 26 BLAAUW VILLAGE OCTODEC INVESTMENTS LIMITED Reviewed condensed annual results
Slide 28: Financial results and capital management
FINANCIAL RESULTS AND CAPITAL MANAGEMENT KEMPTON PLACE
Slide 29: Distributable earnings (SA REIT FFO)
DISTRIBUTABLE EARNINGS (SA REIT FFO) Reviewed Audited Doubtful debts at 1.7% % 31 August 2023 31 August 2022 of rental income change R’000 R’000 (FY2022: 1.6%) Revenue 3.3 1 995 095 1 930 520 Sundry income 100.0 12 329 − Property operating expenses 5.3 (1 067 118) (1 013 460) Included in administrat
Slide 30: Abridged condensed consolidated statement of financial position
ABRIDGED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed Audited 31 August 2023 31 August 2022 Fair value increase ASSETS R’000 R’000 of 1.5% Non-current assets Investment property 11 090 700 10 890 365 Investment in joint ventures 44 356 47 761 Disposal of 7 properties Furniture, fi
Slide 31: Statement of financial position [continued]
ABRIDGED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION [CONTINUED] Reviewed Audited Borrowings stable at R4.345 billion 31 August 2023 31 August 2022 compared to prior year EQUITY AND LIABILITIES R’000 R’000 (FY2022: R4.375 billion) Equity 6 559 626 6 321 840 Non-current liabilities 4 234 5
Slide 32: Dividend policy and dividend paid FY2023
DIVIDEND POLICY AND DIVIDEND PAID FY2023 Octodec’s dividend policy is based on: • retaining sufficient funds for maintenance and development and acquisition opportunities as and when these arise; • maintaining a strong balance sheet with an acceptable loan to value ratio; • maintaining a distributio
Slide 33: Investment property valuations
INVESTMENT PROPERTY VALUATIONS Investment property R11.2 billion (FY2022: R11.0 billion) • Improved rental income impacted valuations positively • External valuations performed in line with JSE Listings Requirements • 87 properties, representing 25.4% of the portfolio, with a carrying amount of R2.8
Slide 34: Investment property valuation results [continued]
INVESTMENT PROPERTY VALUATION RESULTS [CONTINUED] Reviewed 31 August 2023 Weighted average Weighted average long-range Weighted average Number of Fair value capitalisation rate vacancy factor expense ratio properties R’000 % % % Capitalisation rates 8.50% – 8.75% 2 645 800 8.6 1.8 27.9 9.00% – 10.00
Slide 35: Cash flow for the year ended 31 August 2023
CASH FLOW FOR THE YEAR ENDED 31 AUGUST 2023 OCTODEC INVESTMENTS LIMITED 34 Reviewed condensed annual results for the 12 months ended 31 August 2023
Slide 36: Capital management
CAPITAL MANAGEMENT Weighted Reviewed average interest rate 31 August 2023 per annum Prudent management of debt R’billion % • LTV at 37.7% Bank loans 4 015.6 10.4 • Maximum LTV Ratio – Domestic Medium-Term Note (DMTN) Programme Group (50% – 55%) – Unsecured 330.4 10.4 Total borrowings 4 346.0 10.4 Co
Slide 37: Funding split
FUNDING SPLIT 31 August 2023 31 August 2022 Successful refinancing of facilities • Total refinance of Nedbank facilities with a tenure of 7% 7.5% between 2 to 5 years R1 515 million R1 469 million Nedbank Nedbank 35% 33.6% • Refinance of 2 Standard Bank 22% 21.7% R1 551 million R1 627 million credit
Slide 38: Borrowings and cash flow management
BORROWINGS AND CASH FLOW MANAGEMENT Interest rate derivatives Loan expiry profile – Actively monitoring opportunities expiry profile – R’million and % to extend hedges – new 3-year R’billion and % forward starting swap of R500 million taken at a lower rate to replace a R500 million 2024 6.4% R277 sw
Slide 39: Environmental, social, and governance (ESG) reporting
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) REPORTING Octodec continues to place increasing focus on ESG considerations. Environmental With environmental sustainability being a key area, we continue to roll out solar initiatives Progress to date: • Installed solar power at Waverley Plaza (convenienc
Slide 40: ESG reporting [continued]
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) REPORTING [CONTINUED] Social impact • Education We are in the process of establishing an Early Childhood Development Centre in partnership with our long-standing beneficiary, Cotlands, to provide our tenants’ children with qualified staff, in a nurturing,
Slide 41: Outlook
OUTLOOK HEALTH CONNECT OCTODEC INVESTMENTS LIMITED 40 Reviewed condensed annual results for the 12 months ended 31 August 2023
Slide 42: Outlook
OUTLOOK The increase in residential leasing activity with reduced vacancies in the residential portfolio in 2023, had a positive impact and we remain optimistic that this sector will continue to perform strongly • online applications portal bearing fruit – increased applications • diversified offeri
Slide 43: Outlook [continued]
OUTLOOK [CONTINUED] Going forward, we are focusing on the recycling of non-core assets and redeveloping assets in strategic locations to grow our earnings Remain cautious in our approach to developments, focusing on maintaining a healthy balance sheet without compromising on quality Octodec is well
Slide 44: Questions and answers
QUESTIONS AND ANSWERS THE WASH BAR, THE HANGAR
Slide 45: Appendices
APPENDICES OCTODEC STAFF
Slide 46: Looking ahead – our strategy from 2024
LOOKING AHEAD – OUR STRATEGY FROM 2024 After facing challenges in a changing environment for several years, we Strategy initiated a strategic review aimed at formulating an updated strategy for the medium term. The executive and management team of City Property Octodec’s revised strategy guides our
Slide 47: Top 10 properties
TOP 10 PROPERTIES Account for 30% of the investment property portfolio by value Property Location Sector Size (m2) The Fields Tshwane, Hatfield Mixed use 57 342 Killarney Mall Johannesburg, Killarney Shopping centre 47 470 Kempton Place Kempton Park Mixed use 35 437 Centre Walk Tshwane CBD Mixed use
Slide 48: Octodec Investments Limited
OCTODEC INVESTMENTS LIMITED 47 Reviewed condensed annual results for the 12 months ended 31 August 2023