JSE-listed real estate investment trust (Reit) Octodec Investments will hold on to about R260m in cash by not paying an interim dividend as it prepares for fallout from the Covid-19 pandemic.

The group, which has the majority of its properties in the Johannesburg and Tshwane city centres, saw its R12.6bn portfolio written down by R213.9m during the six months to end-February, reporting increased vacancies as SA’s recession put pressure on the property sector.

Octodec, owner of Killarney Mall and Woodmead Value Mart, is headed by MD Jeffrey Wapnick, whose family founded real estate manager City Property, which manages Octodec’s assets.

Wapnick said Octodec’s focus is on holding cash and cutting back on new initiatives while the pandemic persists in SA.

He said the national lockdown means Octodec needs to focus on its relationships with tenants and helping the smaller ones survive through the crisis. The fund is also focused on ensuring its staff is paid for April and May.

“We are satisfied with the group’s reasonable performance given the recessionary environment and difficult trading conditions faced,” said Wapnick.

“Up until March 26, things were spot-on operationally. We were doing as well as we could, despite operating in a recession and with looming credit ratings downgrades from the likes of Moody’s. But then Covid-19 happened and we have focused on making sure our balance sheet is defensive and our staff is looked after. We have had to shelve planned projects and plan about how we can save on costs post-lockdown.”

Octodec CFO Anthony Stein said he expects increased arrears from tenants due to the coronavirus pandemic and is dealing with requests for relief on a case-by-case basis.

He said the company is engaging with funders but is comfortable with its financial position. “Our cash resources and undrawn banking facilities total more than R600m and we are comfortable with our liquidity position based on a number of stress tests that we have run,” he said.

The group generated distributable earnings of R258.3m — about 97c per share during its half-year. It had previously paid an interim dividend of 101.7c per share, about R270m in distributions.

Nesi Chetty, a senior portfolio manager at Stanlib, said Octodec remains well managed, given the crisis the listed property sector is facing in general.

“The market was expecting Octodec’s rental revenue to be subdued, given the current negotiations in the retail sectors between tenants and landlords, and also increased reversions in the office portfolio,” he said.

Chetty said that in the short term Octodec “will continue to focus on improving liquidity and strengthening the balance sheet. It is not at risk of breach of covenants currently, but the process is being managed by both property companies and the banks”.

Update: April 22 2020 
This article has been updated with comment and financial information throughout.


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