Octodec Investments Limited · JSE:OCT
Octodec Investments — H1 2023 Earnings Presentation
47 slides from Octodec Investments's earnings presentation, May 16, 2023
Slide 1: Interim results for the six months ended 28 February 2023
Interim results for the six months ended OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023 28 February 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 Contact details 8 Appendices Corner Place LIMITED Interim results for the six months ended 28 February 2023 OCT
Slide 3: Octodec at a glance
OCTODEC AT A GLANCE OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 4: Octodec at a glance
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
Performance highlights Distributable income after tax (REIT Distributable Rental income Like-for-like funds from operations) income per share (R’million) rental growth (R’million) (cents) 974.2 4.1% 234.5 88.1 (1H2022: 944.4) (1H2022: 1.2%) (1H2022: 211.8) (1H2022: 79.6) 3.2% +2.9% +10.7% +10.7% Cas
Slide 6: Rental income analysis
Rental income analysis Rental income by sector Geographical analysis of rental income 28 February 2023 28 February 2023 Tshwane CBD: 36.7% Residential: 32.8% (1HFY2022: 35.9%) (1HFY2022: 30.6%) 4.5% 4.3% Johannesburg CBD: 18.6% 7.3% Retail – 4.5% (1HFY2022: 19.1%) street shops: 24.1% 5.0% (1HFY2022:
Slide 7: Our portfolio performance: residential
OUR PORTFOLIO PERFORMANCE: RESIDENTIAL OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 8: Residential
Residential GLA** Number Number of properties residential units 415 739m2 (1HFY2022: 415 490m2) 65 9 243 (1HFY2022: 65) (1HFY2022: 9 243) Johannesburg Tshwane 36% 64% (1HFY2022: 36%) (1HFY2022: 64%) ** The GLA for 1HFY2022 has been changed to take into account the reclassification of GLA from "Speci
Slide 9: Residential continued
Residential continued Rental income Rental income Total vacancies** Rental income** growth growth (% of GLA) (like for like)* R242m 10.3% 6.9% (1HFY2022: R219m) 10.4% (1HFY2022: 4.3%) (1HFY2022: 15.4%) (1HFY2022: 5.6%) Tshwane Hatfield Tshwane Johannesburg Kempton Place vacancies** vacancies** vacan
Slide 10: Residential continued
Residential continued Significant improvement Achieving rental growth The Fields Kempton Place Leasing enquiries in vacancies Vacancies improved Lower vacancies for the six • Octodec’s largest asset, Vacancies stabilised at Continued leasing enquiries significantly from 15.4% during months and renta
Slide 11: Residential continued
Residential continued Tenant profile analysis, Market for applications received conditions in Prospects during the period Johannesburg CBD • 25% of residential applications • Supply / demand equilibrium • Based on success of shared are Government employees achieved in the Johannesburg accommodation
Slide 12: Our portfolio performance: commercial
OUR PORTFOLIO PERFORMANCE: COMMERCIAL OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 13: Retail – shopping centres
Retail – shopping centres GLA** Rental income** 97 525m2 R90m (1HFY2022: 97 132m2) (1HFY2022: R87m) Rental income Total vacancies growth (% of GLA) 3.6% 6.4% (1HFY2022: 4.0%) (1HFY2022: 7.4%) ** Rental income and GLA has been changed to take into account the reclassification of GLA from “Specialised
Slide 14: 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 • Design aspects of solar power installation being finalised, with antic
Slide 15: Retail – shopping centres continued
Retail – shopping centres continued Johannesburg: Woodmead Value Mart Johannesburg: Killarney Mall • 5.9% rental income growth • Rental income increased by 5.3% • Currently 100% occupied • Continued focus on tenant mix • A centre of authentic brands and great value • Vacancies at 16.1% • Design aspe
Slide 16: Retail – shops
Retail – shops Rental income GLA** Rental income** growth 348 045m2 R177m 0.7% (1HFY2022: 356 726m2) (1HFY2022: R175m) (1HFY2022: (2.4%)) Rental income Total vacancies** increase (% of GLA) (like for like)* 3.2% 19.4% (1HFY2022: 17.8%) (1HFY2022: (0.1%)) * Excludes the impact of disposed properties
Slide 17: Retail – shops continued
Retail – shops continued Prime CBD properties Continued improvement Strategic capital projects and retail • Still in demand and well let The following new tenants took Shoprite Lilian Ngoyi building: occupation and are trading well: • Offers more growth • The building upgrade was opportunities than
Slide 18: Offices
Offices Total vacancies** Core vacancies** GLA** (% of GLA) (% of GLA) 456 860m2 38.1% 23.3% (1HFY2022: 465 263m2) (1HFY2022: 38.1%) (1HFY2022: 23.6%) Let to Rental income Let to SMMEs** Government** Rental income Rental income** decrease (% of rental income (% of total rental income decrease (like
Slide 19: Offices continued
Offices continued Offices comprise Continued improvement Strategic capital projects • Government and Parastatals • Receiving enquiries from • We continue to explore value Government and Parastatal adds such as Wi-Fi, shared • Smaller units occupied by small, departments for additional meeting rooms
Slide 20: Offices continued
Offices continued Leases with • Government and Parastatals have adopted a hybrid working model government • Operating environment challenging but manageable with strong relationships • They continue to meet their payment obligations Our six largest government tenants by GLA GLA m2 Tshwane Metropolit
Slide 21: Industrial
Industrial Rental income Total GLA** Rental income** increase 218 146m2 R54m 3.8% (1HFY2022: 222 582m2) (1HFY2022: R52m) (1HFY2022: (10.9%)) Rental income Total vacancies Core vacancies increase (% of GLA) (% of GLA) (like for like)* 7.8% 6.2% 5.7% (FY2022: 7.2%) (FY2022: 6.7%) (1HFY2022: (4.5%)) *
Slide 22: Industrial continued
Industrial continued Small and medium-sized industrial parks with mini units catering for Strategic projects start-up and small businesses • Affordable rental options • Completed installation of solar panels at The Tannery • Security and access control to industrial parks • Planned installation of s
Slide 23: Vacancies by sector
Vacancies by sector Total vacancies (%) Core vacancies (%)* 38.1 38.1 23.3 23.6 19.4 17.8 14.4 14.4 22.3 20.6 19.5 19.5 7.4 6.9 7.0 6.4 6.7 5.7 6.7 7.7 6.2 7.2 6.9 7.0 Offices Retail - Retail - street Industrial Residential Total Offices Retail - Retail - street Industrial Residential Total shopping
Slide 24: Lease expiry profile at February 2023
Lease expiry profile at February 2023 By rental income (%) By GLA m² (%) Feb 2028 Feb 2028 Feb Feb Feb Feb and Feb Feb Feb Feb and 2024 2025 2026 2027 beyond 2024 2025 2026 2027 beyond Vacant Total Sector Residential 98.0 1.8 0.2 – – 89.9 2.7 0.5 – – 6.9 100.0 Commercial Retail – street shops 37.6 2
Slide 25: Lease expiry profile continued
Lease expiry profile continued Majority of leases are typically of a short-term nature, with Profile in line Non-national tenant lease periods of 12 months. with historical trends leases typically Typical of residential and and expectations one to five-year term small to medium-sized enterprises Ave
Slide 26: Update on leases > 3 000m² that expired pre-February 2023
Update on leases > 3 000m² that expired pre-February 2023 Building Tenant Lease expiry GLA (m²) Renewal status Govpret Department of Justice October 2022 5 868 Lease terms agreed at a rent freeze in year one of National Office the renewal period, escalating at 6% per annum for three years; awaiting
Slide 27: Leases > 3 000m² expiring FY2023/24
Leases > 3 000m² expiring FY2023/24 Building Tenant Lease expiry GLA (m²) Renewal status Dynamech Office South African Police Services February 2023 5 670 Offer for three-year renewal made to tenant for Park consideration 28 Church Square National Prosecuting Authority March 2023 5 488 Offer for thr
Slide 28: Reversions by sector
Reversions by sector New leases Renewals Reversions for the six-month period % % Residential 0.8 8.3 Offices 2.3 (2.2) Retail – street shops (0.6) (12.5) Retail – shopping centres 1.2 4.5 Industrial 7.7 1.0 The above table reflects the reversions on new leases and renewals in respect of units vacate
Slide 29: Collections
Collections Total collections as at 28 February 2023 Collected R1 064 718 (1HFY2022: R1 036 118) Billed Collected Residential R1 087 857 95.6 to billed YTD 98.6 (1HFY2022: R1 052 156) (%) Commercial Collected to billed % 97.9% (1HFY2022: 98.5%) OCTODEC INVESTMENTS LIMITED Interim results for the six
Slide 30: Financial results and capital management
FINANCIAL RESULTS AND CAPITAL MANAGEMENT OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 31: Distributable earnings (SA REIT FFO)
Distributable earnings (SA REIT FFO) Unaudited Unaudited % 28 February 2023 28 February 2022 change R’000 R’000 Doubtful debts Net property 944 350 at 1.5% of expense-to-rental Revenue earned 3.2 974 226 rental income income ratio improved Property operating expenses 1.1 (503 198) (497 829) (Feb 202
Slide 32: Abridged condensed consolidated statement of financial position
Abridged condensed consolidated statement of financial position Unaudited Audited 28 February 2023 31 August 2022 ASSETS R’000 R’000 Disposal of 5 Fair value increase properties for a total Non-current assets of 1.2% consideration of R76 million Investment property 11 026 500 10 890 365 Investment i
Slide 33: Abridged condensed consolidated statement of financial position continued
Abridged condensed consolidated statement of financial position continued Unaudited Audited 28 February 2023 31 August 2022 EQUITY AND LIABILITIES R’000 R’000 Increase in deferred Equity 6 469 020 6 321 840 tax due to tax losses utilised Non-current liabilities 3 125 923 3 967 674 Interest-bearing b
Slide 34: Investment property valuations
Investment property valuations Investment property R11.1 billion (FY2022: R10.9 billion • Improved rental income impacted valuations positively • External valuations performed in line with JSE Listings Requirements • 49 properties, representing 12.3% of the portfolio, with a carrying amount of R1.4
Slide 35: Investment property valuations continued
Investment property valuations continued Weighted Weighted Weighted average average average capitalisation long-range expense Number of Fair value rate vacancy factor ratio properties R’000 % % % 28 February 2023 (unaudited) Capitalisation rate 8.25% – 8.75% 6 2 262 100 8.7 7.5 31.8 9.00% – 10.00% 7
Slide 36: Cash flow for the period ended 28 February 2023
Cash flow for the period ended 28 February 2023 Strong cash flow generated from operations (R’000) OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023 35
Slide 37: Capital management
Capital management Prudent management of debt Weighted average Unaudited interest rate 28 February 2023 per annum • LTV at 38.8% R’billion % • Maximum LTV Ratio – Group (50% – 55%) Bank loans 3 659 9.6 Domestic Medium Term Note (DMTN) Programme • Interest cover ratio (ICR) 2.28x – Unsecured 330 9.5
Slide 38: Funding split
Funding split Refinancing of facilities 28 February 2023 31 August 2022 • Total refinance of Nedbank facilities with a tenure of between 2 to 5 years 7.6% R1 450 million 7.5% R1 469 million • Refinance of 2 Standard Bank Nedbank Nedbank credit facilities with a tenure of 33.2% R1 629 million 33.6% R
Slide 39: Borrowings and cash flow management
Borrowings and cash flow management Actively monitoring opportunities to extend hedges – new 3 year forward Interest rate expiry profile – Loan expiry profile – starting swap of R500 million taken at a R’billion and % R’billion and % lower rate to replace a R500 million swap maturing in October 2023
Slide 40: Outlook
OUTLOOK OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 41: 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 offeri
Slide 42: 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 po
Slide 43: Questions and answers
QUESTIONS AND ANSWERS OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 44: Appendices
APPENDICES OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023
Slide 45: Our strategy
Our strategy Create sustainable value for our shareholders • Reduce our vacancies through active asset management • Explore, create and take advantage of opportunities to generate rental streams from Strategy non-traditional sources • Deliver on tenant expectations Octodec’s strategy guides our busi
Slide 46: 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 56 449 Killarney Mall Johannesburg, Killarney Shopping centre 47 470 Kempton Place Kempton Park Mixed use 35 437 Centre Walk Tshwane CBD Mixed use
Slide 47: Octodec Investments Limited Interim results
OCTODEC INVESTMENTS LIMITED Interim results for the six months ended 28 February 2023