interim results - octodec · ‒ interim distributable income of 97.0 cents per share ‒...

INTERIM RESULTS for the period ended 29 February 2020OCTODEC INVESTMENTS LIMITED

Interim Resultsfor the period ended 29 February 2020


AGENDA

Octodec at a glance1

COVID-192

Overview for the period3

Our portfolio performance4

Our results and capital management5

Outlook6

Questions and answers7

Contact details8

Appendices9


OCTODECAT A GLANCE


OCTODEC AT A GLANCE

4

JSE-listed REIT since 1990 with 280 properties, total value of R12.6 billion

Our growth strategy is underpinned by three main objectives:

Create sustainable stakeholder value

Optimise our portfolio

Optimise our balance sheet and funding structure

We invest in properties situated mainly in the Tshwane and Johannesburg CBDs

Properties managed by City Property Administration (City Property):

Operational excellence with over 50 years’ property and asset management experience in industrial, office,

retail, residential and specialised property


COVID-19


COVID-19 RESPONSE

6

This unprecedented event is expected to continue to impact our business, with the future outlook being

highly uncertain

Swiftly adjusted to the operational impact of the global pandemic ahead of lockdown

A COVID-19 task team is in place and monitoring the situation on a daily basis:

Jeffrey Wapnick (MD), Anthony Stein (FD), City Property exco and support function representatives

Implement hygiene, safety measures and Government directives across the portfolio

Active risk management and implementation of mitigating actions

Proactive engagements with tenants, staff, funders and other stakeholders

Cash flows and costs management in line with changing operational requirements


COVID-19 RESPONSE continued

7

Business continuity and safety measures delivering as planned:

Increased use of electronic channels to service clients

Essential services to tenants maintained

Administrative functions carried out successfully remotely

Strategic objectives refocused around balance sheet management and liquidity planning

Strategic stakeholders’ engagements to mitigate effects on the broader value chain

Participating in industry discussions that support industry sustainability

Broadly supportive of the Property Interest Group’s rental relief guidelines for retail tenants

Commitment to staff members and suppliers, within established parameters


COVID-19 IMPACT

8

No new leasing activity taking place

Rate of collections affected by short-term uncertainty during the lockdown:

Government tenant collections unaffected

Residential tenants holding on to cash, despite being willing payers. Many tenants moved back “home” ahead

of lockdown

Retail negotiations ongoing; support required for smaller tenants

Providing relief to tenants on a case-by-case basis, within reason

Risks to manage:

Businesses downsizing or vacating premises altogether

Entrepreneurs and small businesses choosing to work from home

Corporate failures, administration and/or liquidation

Impact of reduced investor confidence and bank appetite to provide finance on disposals


9

Clearly going to continue to impact our business, with the outlook being highly uncertain

Active steps taken to enhance our financial position:

Certain repairs, maintenance costs and capex curtailed or deferred

Sources of funding further diversified; new loan facilities totalling R450 million secured with Absa

Good progress made on proactively addressing short-term loan expiries

Distributable earnings retained; no interim dividend declared

Following the recent unprecedented reductions in the South African repo rate, opportunity to take advantage of

the lower interest rate cycle

BALANCE SHEET AND LIQUIDITY RESPONSE


BALANCE SHEET AND LIQUIDITY RESPONSE continued

10

Tenant payment trends highly uncertain

Closely monitoring and trying to predict trends and impact on liquidity

Significant decline in collections for April

Continuous proactive engagements with all funders

Closely monitoring the impact on our debt covenants

Actively managing headroom and flexibility within bank debt covenants

Material uncertainty around valuation metrics

Continued and objective evaluation of impact on property valuations required

Continuous modelling across various scenarios, including impact on LTV and interest cover ratios

Stress tested our liquidity under these scenarios and are comfortable there is sufficient liquidity

Existing cash resources and unutilised banking facilities total R600 million

Supported by non-payment or flexibility in pay out of future dividends


OVERVIEW FOR THE PERIOD


Context Progress

Local economy’s continued vulnerability to absence of

structural reforms in a challenging operating environment, with

ongoing bouts of load shedding

‒ Operational excellence to mitigate risks

Challenging leasing environment, with cost cutting being the

main tenant driver

‒ Progress made in reducing overall commercial vacancies

‒ Total and core vacancies by GLA similar at 17.9% and 11.7% respectively

‒ Improved like-for-like growth in rental income of 2.2%

‒ Arrears and doubtful debt provisions kept at acceptable levels

‒ Property costs-to-revenue ratio (net of recoveries) increased to 37.7%

Increased new residential supply by competitors in

Johannesburg CBD

‒ Innovative and value-added initiatives introduced to improve our offering

and ensure we remain relevant

‒ Greater emphasis on marketing during the period

Council service delivery issues with rising costs (utility and

assessment rates)

‒ Strategic focus on uplifting key Tshwane and Johannesburg CBD nodes

‒ Greater efficiencies in utility management

OVERVIEW FOR THE PERIOD

12


Context Progress

Challenging construction environment ‒ Completion of projects at acceptable yields is challenging

‒ “Construction mafia” increase risk of delayed completion

‒ Uncertainty regarding commencement of larger projects

‒ Actively focusing on the disposal of some of our mothballed properties,

previously earmarked for development

Weakening property fundamentals putting pressure on

profitability as well as property valuations

‒ Decrease in fair value of investment property by R213.9 million

Focus on balance sheet optimisation while reducing risk ‒ Interest rate swaps and loans tenures lengthened

‒ Active disposal of non-core and underperforming assets, although proving

to be more challenging

‒ Diversification of funding sources

Challenging to achieve distributable income growth in

recessionary environment with weak economic and

trading conditions

‒ Interim distributable income of 97.0 cents per share

‒ Distributable income for FY2020 to be weighed down by COVID-19

OVERVIEW FOR THE PERIOD continued

13


OURPORTFOLIO PERFORMANCE


OUR PORTFOLIO PERFORMANCE

15

Urbanisation underpinning sustainability of our existing portfolio and future growth potential

Tshwane (66.5% of portfolio)

Tshwane 1 091 604m² (FY2019: 1 094 163m²)

Tshwane CBD 525 727 m² (FY2019: 526 792m²)

Concentration of investments in strategic nodes

Recent developments and upgrades improving nodes

Johannesburg (33.5% of portfolio)

Johannesburg 550 435m² (FY2019: 566 268m²)

Johannesburg CBD 408 519m² (FY2019: 420 839m²)

Urban renewal gaining momentum

Increasing private sector investment


DISPOSALS

16

Recycling of capital to ensure sustainable value creation

Strategy is to dispose of non-core and underperforming properties

This includes mothballed properties previously earmarked for development

Disposed of 9 properties during the period at an average exit yield of 12.4% and at a profit of R1.6 million

At the date of this report:

5 properties already transferred for a total consideration of R78.2 million

Transfer of 4 properties for a total consideration of R66.3 million is expected to take place during the H2 of FY2020

Proceeds used to repay debt and to fund smaller upgrades of properties

Increasingly becoming more difficult to dispose of our properties, with banks reluctant to provide finance


22.9(FY2019: 23.6)

9.7(FY2019: 10.1)

15.8(FY2019: 15.8)

31.8(FY2019: 32.2)

7.4(FY2019: 7.0)

12.4(FY2019: 11.3)

Rental income by sector (%)

Retail – shops Retail – shopping centres

Offices Residential

Industrial Specialised and other

17

PORTFOLIO ANALYSIS: RENTAL INCOME

35.1(FY2019: 34.7)

20.4(FY2019: 21.3)

12.8(FY2019: 12.4)

12.1(FY2019: 11.8)

6.2(FY2019: 6.5)

5.0(FY2019: 5.0)

4.3 (FY2019: 4.3)

4.1(FY2019: 4.0)

Rental income by geographical area (%)

Tshwane CBD Johannesburg CBD

Tshwane Other Johannesburg and surrounding areas

Tshwane – Hatfield Tshwane – Arcadia

Silverton and surrounding areas Waverley, Gezina, Moot


18

PORTFOLIO ANALYSIS: GLA

19.9(FY2019: 20.3)

5.7(FY2019: 5.7)

24.6(FY2019: 24.9)

25.6(FY2019: 25.7)

14.7(FY2019: 14.8)

9.5(FY2019: 8.6)

GLA by sector (%)

Retail – shops Retail – shopping centres

Offices Residential

Industrial Specialised and other

32.0(FY2019: 31.8)

24.9(FY2019: 25.6)

15.0(FY2019: 14.8)

8.6(FY2019: 8.6)

6.8(FY2019: 6.7)

4.7(FY2019: 4.6)

4.3(FY2019: 4.2)

3.7(FY2019: 3.7)

GLA by geographical area (%)

Tshwane CBD Johannesburg CBD

Tshwane Other Johannesburg and surrounding areas

Silverton and surrounding areas Tshwane – Arcadia

Tshwane – Hatfield Waverley, Gezina, Moot


RESIDENTIAL

As at

29 Feb 2020

As at

31 Aug 2019

Number of properties 71 72

Number of residential units 9 332 9 413

Johannesburg (%) 36 36

Tshwane (%) 64 64

GLA (m²) 420 673 428 244

Rental income (R’million) 244 505

Rental income growth (like-for-like*) (%) 0.0 3.5

Total and core vacancies (% of GLA) 11.0 6.7

Bachelor R3 500 – R4 100

1 Bedroom R4 200 – R4 800

2 Bedroom R5 400 – R6 000

Average monthly rentals (excluding Hatfield)* Like-for-like rental income growth, after taking into account occupancy levels,

reversions and escalations for the period, assuming no major development activity.

19

Jeff’s Place


20

Tenant profile analysis, for applications during the period

24% of applicants are government employees

39% of occupants are students

Churn at 40% per annum

Average gross monthly salary per application of R30 767

Gross monthly salary above R35 000 – 12%

Affordability and uncertainty remains a concern for

our tenants

Increased competition in the Johannesburg CBD

with new residential buildings being released into

the market

Temporary imbalance between supply and demand

The Fields is Octodec’s biggest asset and situated in

Hatfield, a highly competitive area within the student

accommodation market

Decreased vacancies from FY2019

Offering furnished accommodation on a trial basis

Response to tough operating environment

Roll out of WiFi to enhance our product offering

Innovative and value-adding marketing campaigns

Maintaining our competitive edge by providing quality

apartments and service at affordable rentals

Refreshing of common areas and amenities

RESIDENTIAL continued


RETAIL – SHOPS

As at

29 Feb 2020

As at

31 Aug 2019

GLA (m2) 326 428 336 435




* Like-for-like rental income growth, after taking into account occupancy levels,


21

Retail Street Shops


Offer shoppers a selection of brands, services and

food outlets

CBD retail offers more growth opportunities than

traditional shopping centres

Strong demand for well-located CBD retail node

with most vacancies situated outside of this

Lower cost structures (common area, security,

cleaning)

Rental growth under pressure, more rental freezes,

negative rent reversions and larger tenant installations

Strategic capital project:

Shoprite Tshwane and Shoprite Eloff Street –

consideration of upgrades to these properties,

however, not yield enhancing

22

RETAIL – SHOPS continued

Centre Walk


Killarney Mall

RETAIL – SHOPPING CENTRES

As at

29 Feb 2020

As at

31 Aug 2019

GLA (m2) 93 796 94 012






23


24

Our six high quality neighbourhood/convenience

shopping centres:

Johannesburg: Killarney Mall and Woodmead Value Mart

Tshwane: The Park (previously Elardus Park), Waverley

Plaza, Gezina City and Blaauw Village (50% held JV)

The Park Shopping Centre

Upgrade to fresh modern look – R42.7 million

Significant reduction in vacancies, target 100% let in FY2020

New Pick n Pay Clothing, Ackermans, Gadgets Galore and

an improved food offering

Woodmead Value Mart

100% occupied during the period

Continues to outperform with strong rental growth of 11.1%

New G Star, ASCO, Replay and Levinsons

Killarney Mall

Rental income growth of 3.8%

Continued focus on improving tenant mix

Occupancy levels improved

New leases concluded with Tourvest (warehouse space –

previously vacant), Tammy Taylor and Ubik Home

PNA lease signed post period end

Waverley Plaza, Gezina and Blaauw Village

No vacancies

5.1% combined rental income growth

New Pick n Pay Clothing at Waverley Plaza

RETAIL – SHOPPING CENTRES continued


OFFICES

As at

29 Feb 2020

As at

31 Aug 2019

Let to government (% of total rental income

from offices)53.2 49.4

Other (% of total rental income from offices) 46.8 50.6

GLA (m2) 403 999 412 627

Office space held for development/mothballed

(opportunities to sell, develop or enter into

partnerships) (% of GLA)

24.8 24.7



Total vacancies (% of GLA) 42.4 43.0

Core vacancies (% of GLA) 17.6 18.3



25

Bank Towers


26

Offices comprise

Government offices

Smaller units occupied by SMEs

Renewal of leases by National Department of Public

Works (DPW)

Challenging operating environment

Sustainability of revenue strengthened by successful renewal

of 18 leases

Renewal of 3 leases expected to be signed shortly

Tenure of leases of 3 – 5 years

Rentals at slightly less than FY2019 rentals

Non-government

Rentals stable

New tenants at Killarney Mall – Tourvest and Exclusive Books

with a total GLA of 1 801m2

Considering contemporary alternative offerings:

Shared office space model suitable for CBD market

Improved tenant offering

Strategic capital projects

High priority to ensure quality assets

Air conditioning and modernisation cost of R25 million for

FY2020 already committed

Considering the upgrade of vacant Ina Building situated in

Tshwane CBD to medical suites

Next door to Louis Pasteur Hospital

Cost of R40 million and 14% marginal yield

Possible commencement after certainty returns to market

OFFICES continued


INDUSTRIAL

As at

29 Feb 2020

As at

31 Aug 2019

Total GLA (m2) 241 298 246 363







27

The Tannery Industrial Park


Successful redevelopment of properties has yielded

improved returns

Upgrade largely tenant driven

Stronger demand experienced

The Tannery and Sildale industrial parks

showing strong growth in rental income of 8.5%

and 4.7% respectively

Our competitive advantage

Units situated in desirable industrial properties

and areas

Affordable selection of units available

28

Steyn’s Industrial Park

INDUSTRIAL continued


SPECIALISED AND OTHER

As at

29 Feb 2020

As at

31 Aug 2019

Total GLA (m2) 155 845 142 749





In order to provide a more meaningful analysis of our portfolio, the group’s properties

were aggregated into segments with similar economic characteristics reflecting the

occupier’s market it serves* Like-for-like rental income growth, after taking into account occupancy levels,


29

Louis Pasteur


Sector Tenants/Comments GLA m2

Hotels City Lodge and Fortis Hotels (Hatfield Tshwane) 13 458

Auto dealerships 4 motor dealerships (Tshwane and Johannesburg respectively)

Motor dealership with GLA of 3 692m2 let effective from November 2019

15 722

Healthcare facilities Louis Pasteur and Lister Building (Tshwane and Johannesburg CBDs

respectively)

Louis Pasteur Hospital – lease term of 5 years remaining

36 744

Educational facilities Colleges and schools (Tshwane and Johannesburg CBDs)

A few colleges have vacated with rent reductions being granted to others

72 303

Places of worship Situated mainly in the Tshwane and Johannesburg CBDs 17 618

Parking Improved control and revenue after the implementation of new parking

management system

1 982 leases

SPECIALISED AND OTHER continued

30


31

Increased focus on reducing vacancies

during FY2020

Successful decrease in commercial sector

Residential vacancies impacted by new supply,

aggressively marketed by competitors

Mothballed office vacancies of 100 166m2

for future redevelopment, partnerships or

disposal opportunities (FY2019: 101 859m2):

Acquired for development purposes

Consideration of possible sale of some of

these properties

VACANCIES BY SECTOR

Total vacancies

%

Core vacancies

%

29 February 2020

Offices 42.4 17.6

Retail 11.6 11.6

Specialised and other 3.7 3.5

Industrial 8.8 8.3

Residential 11.0 11.0

Total 17.9 11.7

31 August 2019

Offices 43.0 18.3

Retail 12.3 12.3

Specialised and other 6.6 6.3

Industrial 10.2 9.3

Residential 6.7 6.7

Total 17.7 11.4

* Core vacancies exclude lettable area of properties that are mothballed.


By rental income % By GLA m² %

Sector 2021 2022 2023 20242025 and

beyond2021 2022 2023 2024

2025 and

beyondVacant

Commercial

Retail – shops 36.4 24.9 22.6 7.3 8.8 35.9 21.8 15.4 5.6 7.2 14.0

Retail – shopping centres 43.1 17.3 14.4 10.1 15.0 44.6 14.3 11.8 11.2 15.1 3.0

Offices 75.7 9.5 9.6 2.9 2.3 42.4 6.1 5.2 2.0 1.9 42.4

Industrial 61.7 17.1 7.4 5.8 8.0 55.6 17.1 7.2 5.6 5.7 8.8

Specialised and other

Educational facilities 40.4 25.2 12.7 9.1 12.7 47.1 22.8 10.9 12.6 6.5 –

Healthcare facilities 24.8 13.7 10.9 1.9 48.7 17.5 8.7 6.5 1.5 49.9 15.9

Places of worship 76.5 14.0 7.9 – 1.6 74.9 16.6 6.2 – 2.3 –

Auto dealerships 43.8 14.7 – 41.6 – 43.6 23.5 – 32.9 – –

Hotels 100.0 – – – – 100.0 – – – – –

Subtotal 52.9 17.1 14.0 6.9 9.1 44.1 14.5 9.1 5.4 6.8 20.2

Residential 100.0 0.0 – – – 89.0 0.0 – – – 11.0

Total 67.5 11.8 9.7 4.7 6.3 55.6 10.8 6.8 4.0 5.0 17.9

32

LEASE EXPIRY PROFILELease expiry profile by weighted average rental income (%)


Majority of leases provide for monthly agreement at expiry

On expiry effort is made to conclude longer term leases

Typical of residential and small-to-medium sized

enterprise leases

Profile in line with historical trends and expectations

Non-national tenant leases typically 1 – 5 year term.

National tenant leases typically 3 – 5 year term

Average stay of residential tenant is 21 months

18 Government leases renewed, 3 expected to be signed shortly

Represents 31% of revenue from offices

Reflects improved office lease expiry in next reporting period

33

Molo Mollo

LEASE EXPIRY PROFILE continued


Building Tenant Lease expiry GLA (m²) Renewal Comments

Inner Court Edcon – Jet Eloff Street January 2020 9 688Pre-COVID-19: Tenant made an offer for 1 100m² on ground floor

portion only – tenant on 40.9% rent reduction until March 2021

Rentmeester Park Special Investigating Unit March 2020 9 3175-year lease renewal, plus an additional 771m² of office space,

although at lower rentals

The Fields SEDA May 2020 6 568

Submitted tender for renewal on existing premises plus an additional

3 085 m² of office space: SEDA advised that they are awaiting

approval for a lease extension until 31 December 2020, while we

await outcome of the tender

KillarneyUnitrans Automotive –

Killarney ToyotaSeptember 2019 4 096

Notice given for 31 May 2020. Leasing team is proactively seeking a

replacement tenant and different alternatives are under consideration

CCMA Place CCMA May 2020 3 598Lease renewed for a further year; meanwhile, we await the outcome

of a tender process for a 5-year lease

Lenchen Park Voltex May 2020 985 Pre-COVID-19: Tenant confirmed that they will be renewing

Nedbank Plaza Nedbank August 2020 871 Tenant has requested reduced size

Anderson Place Standard Bank February 2020 848 Rent freeze for a 1-year lease renewal

Killarney Truworths August 2020 845 2-year lease under negotiation

Central TowersDepartment of Economic

DevelopmentMarch 2020 764

Renewal offer sent at 6% escalation for 1 year - Tenant generally

renews for 1-year lease term

Total: 37 580m²

34

10 MAJOR LEASE EXPIRIES BY GLA – FY2020


OUR RESULTS AND CAPITAL MANAGEMENT


%

Change

Unaudited

6 months

29 February 2020

R’000

Unaudited

6 months

28 February 2019

R’000

Revenue 3.0 1 007 166 977 603 Like-for-like growth in rental income of 2.2% under pressure (FY2019: 2.0%)

Property operating costs 5.7 (475 782) (450 300) Increased efficiencies where possible, bad debts and movements in doubtful

debt provisions at 1.7% of rental income (FY2019: 1.3%)

Significant increase in repairs and maintenance costs (expected to normalise

in the second half)

Net rental income from properties 0.8 531 384 527 303 Net property expense-to-rental income ratio increased to 31.7%

(FY2019: 30.9%). Margin squeeze a concern

Administrative costs 17.1 (46 402) (39 625) Once-off VAT adjustment of R4.3 million, due to change in VAT apportioning

methodology

Operating profit (0.6) 484 982 487 678

Share of income from joint ventures 1 776 2 468 Prior period included interest received on shareholder loans

Distributable profit before finance costs 486 758 490 146

Net – finance costs 4.0 (225 368) (216 688) Weighted average all-in cost of borrowings 9.3% (FY2019: 9.3%)

Lower interest rate environment has not had a material impact on reducing

finance costs as we have hedged most of our debt

Net income after finance costs 261 390 273 458

Amount attributable to Edcon rent reduction (3 046) −

Distributable earnings attributable to shareholders (5.5) 258 344 273 458

Number of shares in issue (’000) 266 198 266 198

Distributable earnings per share (cents) (5.5) 97.0 102.7

36

OUR RESULTS AND CAPITAL MANAGEMENT

Distributable earnings simplified income statement


Unaudited

29 February 2020

R’000

Audited

31 August 2019

R'000 ASSETS

Non-current assets 12 565 863 12 733 048

Investment property

12 467 501

12 637 240 Fair value of 280 investment properties. Weakening property fundamentals placing pressure on profitability as

well as property valuations

Other financial assets 74 751 74 764 Loan to joint operation (partner)

Derivative financial instruments 850 −

Investment in joint ventures 22 761 21 044 Equity accounted JV – 50% held

Current assets 184 232 201 633 Includes trade and sundry receivables. Arrears and doubtful debt provisions at acceptable levels despite

challenging operating environment. Tenant arrears at 3.5% of gross revenue (FY2019: 3.4%)

Non-current assets held for sale 133 250 209 300 Properties approved for sale

TOTAL ASSETS 12 883 345 13 143 981

EQUITY AND LIABILITIES

Equity 7 350 209 7 578 599

Non-current liabilities 4 633 603 4 220 988

Interest-bearing borrowings 4 417 722 4 027 644 Bank loans, DMTN programme notes. Weighted average term of loans up to 2.6 years

Derivative financial instruments 111 217 99 694 Increased due to mark-to-market valuation of interest rate swap contract liabilities. 91.7% of interest rate risk

hedged, with swap contacts having a weighted average term of 2.6 years

Deferred taxation 93 650 93 650 Liability for recoupment of previous capital allowances

Lease liabilities 11 014 −

Current liabilities 899 533 1 344 394

Interest-bearing borrowings 488 213 950 435 Bank loans, DMTN programme notes. Weighted average term of loans up to 2.6 years

Other 411 320 393 959

TOTAL EQUITY AND LIABILITIES 12 883 345 13 143 981

Shares in issue ('000) 266 198 266 198

Net asset value (NAV) per share (cents) 27.61 28.47

Loan to investment value (LTV) ratio (%) 39.3 38.9

37

Abridged condensed consolidated statement of financial position

OUR RESULTS AND CAPITAL MANAGEMENT continued


2 847

2 761

97 0.7

(80.4) (4)

(99.2)

2 500

2 600

2 700

2 800

2 900

3 000

3 100

3 200

NAV at31 August 2019

Distributableprofit

Other Revaluationof investment

property

Revaluationof interestrate swaps

Distributionpaid

November2019

NAV at29 February 2020

38

KEY DRIVERS IN MOVEMENT IN NET ASSET VALUE PER SHARE

Current weak trading environment

with a medium-term anticipation

of significantly subdued trade will

put further pressure on valuations

and NAV

Octodec share price trading at a

substantial discount to NAV

Movement in NAV (CPS)


39

CASH FLOW FOR THE PERIOD ENDED 29 FEBRUARY 2020

Strong cash flow generated from operations after taking finance costs into account (R’000)

519 316

(232 324)

(264 068)

78 177

(42 893)

1 675

(72 346) (12 463)0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

Cash generated fromoperations

Net finance costs Dividends paid(November 2019)

Proceeds from disposalof investment property

Investing activities Repaymentof loans

Decrease ininterest-bearing

borrowings

Movement forthe period


40

Prudent management of debt

LTV within target range of 35% – 40%

Rigorous review of our property valuations

for the reporting period

Interest rate hedging well above minimum

target of 70%

Proactively addressed loan expiries with

weighted term of 2.6 years (target of at least

2.5 years)

Continue to pay down debt with proceeds

from disposals

Unutilised banking facilities R245.3 million

at end of reporting period

CAPITAL MANAGEMENT

R’million

%

Interest rate

Total borrowings – Banks 4 001.6 8.6

DMTN Programme – unsecured 538.8 8.2

DMTN Programme – secured

(unlisted HQLA)365.5 8.5

TOTAL BORROWINGS 4 905.9 8.5

Cost of swaps – 0.8

TOTAL BORROWINGS 4 905.9 9.3

LTV (%) 39.3

Interest rate hedging – percentage of

borrowings (%)91.7

Weighted average term of swaps (years) 2.6

Weighted average term of debt (years) 2.6


59%R2 965 million

29%R1 435 million

12% R579 million

31 August 2019

Nedbank Standard Bank DMTN Programme

41

FUNDING SPLIT AS AT 29 FEBRUARY 2020

54%R2 672 million

35%R1 695 million

11% R539 million

29 February 2020

Process to further diversify funding ongoing

Diversification of funding sources

‒ Reduced Nedbank facility by

repayment of R210 million

during period

‒ New loan facilities secured

from ABSA amounting to

R225 million each for a 3 and

4-year tenure subsequent to

period end


327149

895

1 200

1 797

161

250

127

10%8%

21%

24%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

31 August 2020 31 August 2021 31 August 2022 31 August 2023 31 August 2024

Secured loans R'000 Commercial paper R'000

42

INTEREST-BEARING DEBT EXPIRY PROFILE AS AT 29 FEBRUARY 2020

Debt maturing prior to 31 August 2020

Commenced process to extend

the short-term debt

Commercial paper (DMTN

Programme) of R161.4 million

Refinancing of R326.8 million

Nedbank loan recently approved

Weighted average term of loans:

Currently 2.6 years

(FY2019: 2.9 years)

Maintain at similar levels

Proactively addressed loan expiries


500

1 250

2 250

500

11%

28%

50%

11%

0%

10%

20%

30%

40%

50%

60%

0

500

1 000

1 500

2 000

2 500

31 August 2021 31 August 2022 31 August 2023 31 August 2024

Amount R'000

43

Lower interest rate cycle presents

opportunity to increase hedging

and offers attractive interest rate

swap opportunities to term out the

expiry profile

At year end, interest rates of

91.7% of borrowings hedged

(FY2019: 85.4%)

Average weighted expiry of

2.6 years (FY2019: 3.0 years)

Expiry profile per financial year

INTEREST RATE HEDGES EXPIRY PROFILE


OUTLOOK


OUTLOOK

45

The ongoing uncertainty, economic and socioeconomic impacts will weigh down on performance for the remainder of the year

We will continue to take proactive steps to protect the business during this time

We remain committed and determined in our efforts to mitigate the reduction in earnings, optimise working capital and preserve

cash flow and liquidity

It is difficult to quantify the impact of COVID-19 on future earnings

Future guidance to shareholders of distributable earnings and dividend payout ratios will depend on:

Octodec's capital requirements

Performance in this weak economy

Proceeds from the sale of investment properties

The impact of COVID-19

While there remains significant uncertainty around the extent and duration of the impact of COVID-19, we believe we are well

positioned as a business to navigate the challenges


QUESTIONS AND ANSWERS


CONTACT DETAILS www.octodec.co.za

Jeffrey WapnickManaging Director

Tel: 082 900 1172

Email: [email protected]

Anthony SteinFinancial Director

Tel: 082 895 5205

Email: [email protected]

http://www.octodec.co.za/


APPENDICES


Investment case

49

Nzunza House

INVESTMENT CASE AND OUR STRATEGY

Proven business model

Well-established strategy

High-quality assets and services

Sound operating fundamentals

Robust portfolio across sectors

Large diversified tenant base

Steady demand driven by urbanisation


Strategic objectives How we do it

Create sustainable value for

our stakeholders

‒ Invest in long-term sustainable properties that offer growth opportunities, focusing on Tshwane

and Johannesburg CBDs and residential properties

‒ Improve the existing portfolio by selling non-core and non-profitable assets

‒ Develop and upgrade our properties to enhance and extract value

‒ Deliver on tenant expectations

‒ Assist our tenants in difficult times to avoid eviction, where possible

‒ Focus on tight control of property expenses

‒ Reduce our vacancies through active asset management

‒ Explore, create and take advantage of opportunities to generate rental streams from non-

traditional sources

Optimise our portfolio ‒ Invest in our property portfolio, with emphasis on assets in our strategic nodes

‒ Maintain our focus in the CBDs and residential

Optimise our balance sheet and

funding structure

‒ Diversity funding

‒ Proactive management of interest rate risks

‒ Management of risk in refinancing of borrowings

Our strategy

INVESTMENT CASE AND OUR STRATEGY continued

50


TOP 10 PROPERTIES

Property Location Sector Size (m2)

The Fields Tshwane, Hatfield Mixed use 57 426

Killarney Mall Johannesburg, Killarney Shopping centre 47 470

Woodmead Value Mart Johannesburg, Woodmead Shopping centre 17 913

Sharon's Place Tshwane CBD Mixed use 20 985

Centre Walk Tshwane CBD Mixed use 25 744

Louis Pasteur Tshwane CBD Medical and other 24 799

Kempton Place Kempton Park Mixed use 35 381

Jeff's Place Tshwane CBD Mixed use 14 793

The Park Shopping Centre Tshwane, East Shopping centre 11 926

Silver Place Tshwane, Silverton Mixed use 26 142

Account for 28% of Octodec investment property portfolio by value

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interim results - octodec · ‒ interim distributable income of 97.0 cents per share ‒...

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