Octodec expects drop in full-year dividends
Company hopes to unlock value for shareholders as political risk and uncertainty settle
Octodec Investments, which owns properties in Tshwane and Johannesburg worth R13bn, says full-year dividends will decline as trading conditions remain tough because of the sluggish economy.
The landlord said on Monday it would pay shareholders 101.7c per share for the six months to end-February, the same amount as a year before.
“The dividend was impacted by pressure on rental income growth as well as an increase in property operating costs,” Octodec said.
For the second six months ending August, dividends would be “slightly lower”, meaning its dividend for the full year would probably fall by about 2%.
Group CFO Anthony Stein said Octodec was expected to pay various costs in the second half of the financial year.
“Interest costs are increasing and we expect to enter new swop rate contracts on interest expenses,” he said.
From April 1 national retailer Edcon’s agreement with Octodec whereby it would pay less rent in order to survive, would kick in. Edcon is paying R400,000 less in rent a month in exchange for Octodec getting an equity share in the struggling retailer.
Octodec CEO Jeffrey Wapnick said he was optimistic that operating conditions for the company would improve after last week’s national election.
“Yes, in the short-to-medium term, this economy isn’t going to soar. But we as a business got a good result from the election. We are hoping that now the president and his new cabinet will be able to implement policies which will make doing business easier in SA. Then, the economy can get a bit of kick and gradually recover,” he said.
Wapnick said Octodec would focus on selling noncore or underperforming properties and would use the proceeds to repay borrowings.
Stein said Octodec had R500m-R700m worth of properties it could sell.
“Quite a few property funds have to sell assets in our market, but we don’t. They have high loan-to-value positions, often of over 40%. Our LTV [loan to value] is about 38%. We would like it to be between 30% and 35% to get more room to manoeuvre. We might sell some more assets if there are buyers, but as long as we meet dividend guidance in this tough market we are happy,” he said.
In the six months to end-February, the company sold 14 properties. Six had already been transferred for a total consideration of R98.8m, while the other eight would raise R39m.