Octodec Investments Limited · JSE:OCT
Octodec Investments — FY2022 Earnings Presentation
52 slides from Octodec Investments's earnings presentation, Nov 1, 2022
Slide 1: Provisional Annual Results for the year ended 31 August 2022
Provisional Annual Results for the year ended 31 August 2022 OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
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 Contact details 8 Appendices The Fields OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 month
Slide 3: Octodec at a glance
OCTODEC AT A GLANCE OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 4: Octodec at a glance
Octodec at a glance Tshwane and surrounds (2021: 69.2%) Johannesburg and surrounds Octodec is a JSE-listed REIT with a (2021: 30.8%) diversified inner city focused property To create and serve a thriving ecosystem Who portfolio of 246 properties, including a of residents, small shop owners, professi
Slide 5: Octodec at a glance – performance highlights
Octodec at a glance – performance highlights Distributable income Cash generated Rental income Profit (loss) for the year after tax (REIT funds from operating activities (R’million) (R’million) from operations) before dividend payment (R’million) (R’million) R1 930.5 R605.1 (2021: R1 838.7) (2021: (
Slide 6: Octodec at a glance – rental income analysis
Octodec at a glance – rental income analysis Rental income by sector Geographical analysis of rental income 31 August 2022 31 August 2022 Tshwane CBD (2021: 36.0%) Residential Johannesburg CBD (2021: 30.7%) 4.4% 6.8% 4.4% (2021: 19.1%) Retail – 4.8% Tshwane other 11.6% street shops (2021: 13.3%) 31.
Slide 7: Our portfolio performance: residential
OUR PORTFOLIO PERFORMANCE: RESIDENTIAL OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 8: Residential
Residential As at As at 31 Aug 2022 31 Aug 2021 GLA (m²) 415 490 419 094 Number of properties 64 68 Number of tenants 8 918 8 258 Number of residential units 9 243 9 304 Johannesburg (%) 36 36 Tshwane (%) 64 64 Number of beds (shared accommodation) 1 864 1 791 Rental income (R’million) 463 430 Renta
Slide 9: Residential continued
Residential continued As at As at 31 Aug 2022 31 Aug 2021 Total and core vacancies (% of GLA) 7.0 15.9 Tshwane (excl. Hatfield) 7.2 13.6 Hatfield Tshwane 7.1 13.0 Johannesburg 6.7 13.1 Kempton Place 3.0 30.0 Significant improvement in vacancies from 15.9% during FY2021 to 7.0% at the end of August 2
Slide 10: Residential continued
Residential continued 33.0% increase in leasing enquiries received through various channels • Demand returned for quality and affordable accommodation • Investment in digital platforms proven to be successful in decreasing vacancies Electronic leasing enquiries 24 Months 6 000 5 438 5 108 5 000 4 58
Slide 11: Residential continued
Residential continued Tenant profile analysis, for applications during the period • 23% of residential applications are Government employees • 31% of occupants are students • Average net monthly salary per applicant of R19 737 • Net monthly salary above R35 000 – 9.6% Competitive market conditions i
Slide 12: Residential continued
Residential continued Prospects • Vacancies returning to pre-pandemic levels • Market rentals are slowly being increased • Wi-Fi rollout 69% completed • Accelerated rollout of cashless laundries as a value-add offering to residential tenants • Increasing semi-furnished, shared accommodation at Nedba
Slide 13: Our portfolio performance: commercial
OUR PORTFOLIO PERFORMANCE: COMMERCIAL OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 14: Retail – shopping centres
Retail – shopping centres As at As at 31 Aug 2022 31 Aug 2021 GLA (m2) 97 538 97 530 Rental income (R’million) 174 164 Rental income growth (%) 5.9 5.2 Rental income growth (like for like) (%)* 4.6 5.2 Total vacancies (% of GLA) 7.7 7.6 Core vacancies (% of GLA) 7.4 7.3 * Excludes the impact of disp
Slide 15: Retail – shopping centres continued
Retail – shopping centres continued Tshwane: The Park, Waverley Plaza, Gezina and Blaauw Village (50% held JV) • Strong performance from these neighbourhood convenience shopping centres • 97.1% combined occupancy • 5.9% combined rental income growth • A new drive-through KFC at Waverley Plaza, compl
Slide 16: Retail – shops
Retail – shops As at As at 31 Aug 2022 31 Aug 2021 GLA (m2) 305 961 310 818 Rental income (R’million) 326 317 Rental income growth (%) 3.0 4.5 Rental income growth (like for like) (%)* 2.0 − Total and core vacancies (% of GLA) 20.5 18.4 * Excludes the impact of disposed properties as well as COVID-1
Slide 17: Retail – shops continued
Retail – shops continued Prime CBD properties still in demand and well let CBD retail offers more growth opportunities than traditional shopping centres • Convenient locations with high foot traffic • Lower cost structures (common area, security, cleaning) Renewed confidence from Nationals to sign l
Slide 18: Offices
Offices As at As at 31 Aug 2022 31 Aug 2021 GLA (m2) 389 868 420 192 Number of tenants 1 514 1 458 • Let to Government (% of total rental income from offices) 56.7 53.7 • Other (% of total rental income from offices) 43.3 46.3 Office space held for development/mothballed (opportunities to sell, deve
Slide 19: Offices continued
Offices continued Offices comprise • Government • Smaller units occupied by small, medium and micro-sized enterprises (SMMEs) Non-parastatals • Tenants under pressure, but occupancy levels stable • Tenants slowly returning to offices Continued improvement on tenant retention and customer service. Re
Slide 20: Offices continued
Offices continued Leases with government • Government return to work policy accelerated • Operating environment challenging but manageable with strong relationships • They continue to meet their payment obligations • Terminated leases with SAPO due to non-payment of account Our six largest governmen
Slide 21: Industrial
Industrial As at As at 31 Aug 2022 31 Aug 2021 Total GLA (m2) 210 630 235 204 Number of tenants 367 415 Rental income (R’million) 99 104 Rental income reduction (%) (4.3) (2.9) Rental income reduction (like for like) (%)* (2.1) (1.0) Total vacancies (% of GLA) 7.7 12.0 Core vacancies (% of GLA) 7.1
Slide 22: Industrial continued
Industrial continued Reduced GLA due to disposal of several industrial buildings outside of our industrial zones Small and large industrial parks with mini units catering for start-up and small businesses • Affordable rental options • Security and controlled access to industrial parks • Rentals were
Slide 23: Specialised and other
Specialised and other As at As at 31 Aug 2022 31 Aug 2021 Number of tenants 296 243 Total GLA (m2) 137 973 138 726 Rental income (R’million) 169 155 Rental income growth (%) 8.9 (10.8) Rental income growth (like for like) (%)* 10.1 (15.4) Total vacancies (% of GLA) 5.2 4.4 Core vacancies (% of GLA)
Slide 24: Specialised and other continued
Specialised and other continued Sector Tenants/comments GLA m2 Hotels City Lodge and Anew (Hatfield Tshwane) 13 458 Auto dealerships Three motor dealerships (Tshwane and Midrand) 12 624 Louis Pasteur and Lister Building (Tshwane and Johannesburg CBDs Healthcare facilities 34 356 respectively) Colleg
Slide 25: Vacancies by sector
Vacancies by sector Total Core* vacancies vacancies* % %* Improved occupancy in residential and industrial sectors 31 August 2022 • Both showing continued improvement since Offices 46.3 26.4 financial year end Retail 17.4 17.4 Specialised and other 5.2 5.2 Industrial 7.7 7.2 Mothballed office vacanc
Slide 26: Lease expiry profile
Lease expiry profile By rental income % By GLA m² (%) August August August August August 2027 and August August August August August 2027 2023 2024 2025 2026 beyond 2023 2024 2025 2026 and beyond Vacant Sector Residential 99.9 0.0 – 0.1 – 92.7 0.1 – 0.2 – 7.0 Commercial Retail Retail – street shops
Slide 27: 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 te
Slide 28: Update on leases > 3 000m² that expired pre-August 2022
Update on leases > 3 000m² that expired pre-August 2022 Building Tenant Lease expiry GLA (m²) Renewal status Capitol CoT Metropolitan Municipality November 2021 12 219 Tenant indicated their intent to move the Towers North department to recently purchased Midtown; tenant currently on a rent freeze A
Slide 29: Leases > 3 000m² expiring FY2022/23
Leases > 3 000m² expiring FY2022/23 Building Tenant Lease expiry GLA (m²) Renewal status Wits Technikon Basa Tutorial Institute December 2022 11 782 Tenant requested an early renewal with a rent reduction of approximately 30% CPA House City Property Administration June 2023 6 208 No concerns foresee
Slide 30: Reversions by sector
Reversions by sector New leases Renewals % % Residential (0.9) 5.3 Offices (12.4) (3.7) Street shops (7.3) (14.8) Retail shops 8.9 0.4 Industrial (4.0) (3.7) The above table reflects the reversions on new leases and renewals in respect of units vacated and relet between 1 September 2021 and 31 Augus
Slide 31: Financial results and capital management
FINANCIAL RESULTS AND CAPITAL MANAGEMENT OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 32: Distributable earnings (SA REIT FFO)
Distributable earnings (SA REIT FFO) Reviewed Audited % 31 August 2022 31 August 2021 change R’000 R’000 Revenue earned on contractual basis 3.3 1 931 091 1 869 511 Like for like increase in rental income of 3.4%. FY2021 decrease of 7.4% COVID-19 rental discounts (98.1) (571) (30 845) Significant de
Slide 33: Abridged condensed consolidated statement of financial position
Abridged condensed consolidated statement of financial position Reviewed Audited 31 August 2022 31 August 2021 ASSETS R’000 R’000 Non-current assets Investment property 10 890 365 11 133 100 245 investment properties. Decrease largely due to disposal of properties Investment in joint ventures 47 761
Slide 34: Abridged condensed consolidated statement of financial position continued
Abridged condensed consolidated statement of financial position continued Reviewed Audited 31 August 2022 31 August 2021 EQUITY AND LIABILITIES R’000 R’000 Equity 6 321 840 5 982 911 Non-current liabilities 3 967 674 2 884 318 Interest-bearing borrowings 3 816 601 2 664 050 Bank loans and DMTN progr
Slide 35: Dividend policy and dividend paid FY2022
Dividend policy and dividend paid FY2022 Octodec’s dividend policy is based on: • retaining sufficient funds for developments and acquisitions as and when these opportunities arise; • maintaining a strong balance sheet with an acceptable loan to value ratio; • maintaining a distribution of at least
Slide 36: Investment property valuations
Investment property valuations Net valuation decline of R82 million or 0.7% (FY2021:R641.1 million or 5.4%) • Pressure on rental income impacted the valuations, albeit to a much smaller extent • Rigorous review of our property valuations for the reporting period • In terms of the JSE Listings Requir
Slide 37: Investment property valuation results continued
Investment property valuation results continued The variable inputs used in the valuations are the estimated rental income, property expenditure, vacancies and the capitalisation rate. The table below reflects the number of buildings and the weighted average of the inputs used in the calculation: Re
Slide 38: Cash flow for the year ended 31 August 2022
Cash flow for the year ended 31 August 2022 Strong cash flow generated from operations (R’000) OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022 37
Slide 39: Capital management
Capital management Prudent management of debt % R’million Interest rate* • LTV at 39.7% • Maximum LTV ratio – group (50% – 55%) Total borrowings – banks 3 676.6 7.9 DMTN Programme – unsecured 330.3 7.8 • Interest cover ratio (ICR) of 2.3 DMTN Programme – secured (unlisted HQLA) 368.3 7.7 • ICR withi
Slide 40: Funding split
Funding split Diversification of funding sources 31 August 2022 31 August 2021 • Decision to diversify funders achieved in current year, through decrease in exposure to R1 469 million R2 260 million Nedbank and increase in 6.6% 7.5% Nedbank 9.6% Nedbank exposure to ABSA R1 627 million R1 665 million
Slide 41: Borrowings and cash flow management
Borrowings and cash flow management Actively monitoring opportunities to extend hedges Strategy is to maintain a hedge profile of between 70% and 80% Interest rate expiry profile – Loan expiry profile – At 31 August 2022, 80.0% of borrowings R’billion and % R’billion and % hedged (FY2021: 96.1%) Ave
Slide 42: Outlook
OUTLOOK OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 43: Outlook
Outlook The increase in residential leasing activity with reduced vacancies in the residential portfolio in 2022, had a positive impact and we remain optimistic that this sector will continue to perform strongly – • online applications portal bearing fruit – increased applications • diversified offe
Slide 44: Outlook continued
Outlook continued Going forward, we will continue to take proactive steps to grow our earnings Octodec is well positioned for future growth, with our resilience underpinned by • our simple structure and focused strategy • consistent performance and proven track record • diversified portfolio with ex
Slide 45: Questions and answers
QUESTIONS AND ANSWERS OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 46: Contact details
Anabel Vieira Financial director Tel: 012 319 8863 Email: Anabel.Vieira@Octodec.co.za Jeffrey Wapnick Managing director Tel: 012 319 8709 Email: JeffW@Octodec.co.za OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 47: Appendices
APPENDICES OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
Slide 48: Our strategy
Our strategy Short to medium term (next five years) Protecting our business and maintaining our property investments to retain tenants and ensure sustainability. Long term (beyond five years) Our aim is to create a thriving inner-city environment that serves the emerging middle class. This requires
Slide 49: Our strategy continued
Our strategy continued Strategy Octodec’s strategy guides our business activities. In response to the challenging operating environment, specific focus areas are prioritised. Our strategy is determined by the board during an annual strategic review session. The aim is to reflect on our strategic obj
Slide 50: 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 57 458 Killarney Mall Johannesburg, Killarney Shopping centre 47 470 Kempton Place Kempton Park Mixed use 35 352 Centre Walk Tshwane CBD Mixed use
Slide 51: Environmental, social and governance (ESG) reporting
Environmental, social and governance (ESG) reporting Octodec continues to place increasing focus on ESG considerations, and with environmental sustainability being a key area, we continue to roll out solar initiatives Progress to date: • Installed solar power at Waverley Plaza (convenience shopping
Slide 52: OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022
OCTODEC INVESTMENTS LIMITED Provisional annual results for the 12 months ended 31 August 2022