JSE-listed real estate investment trust Octodec Investments’ distributable income per share increased by 8.2% for the financial year ended August 31, on the back of a resilient portfolio performance.

The board declared a final dividend of 72.5c apiece, bringing the total dividend for the year to 134.5c, a 7.6% increase on that of the prior year.

CEO Jeffrey Wapnick points out that focused strategic actions and disciplined execution enabled the group to grow rentals across all sectors, improve occupancies, secure lower funding rates, reduce debt and enhance the portfolio.

“Despite facing familiar challenges, renewed market confidence, lower inflation and declining interest rates created a more favourable operating environment which supported the overall strong performance,” he says.

The portfolio, valued at R11.2-billion, delivered revenue growth of 4.6% at R2.2-billion, with all sectors contributing to the increase, although residential and shopping centres were the strongest performers.

Total core vacancies decreased from 14.9% to 12.3%.

Collections remained strong at 99% of total billings.

The focus was on containing costs below or in line with inflation.

Net property expenses increased by 4.1%, driven mainly by above inflation increases in utilities, cleaning and security costs, as well as bad debt provisions.

Administrative and corporate expenses increased by 4.9%, while net finance costs were 0.6% higher, owing to maturing interest rate swaps, offset by improved margins on refinanced borrowings.

Lilian Ngoyi street, in the Johannesburg central business district, remained under repair for the full financial year.

This negatively affected both the retail street shops and residential sector performances owing to tenants of the 14 directly impacted properties having had limited accessibility and being unable to trade effectively.

The street was, however, reopened in September, and Wapnick is bullish that trading conditions will improve as footfall and buying patterns gradually recover.

The residential portfolio achieved a decrease in vacancies from 9.2% to 8% and a 5.4% increase in rental income.

Octodec capitalised on opportunities to convert underperforming offices into residential or mixed-use assets.

Wapnick has lauded the successful launch of the company’s communal living pilot project, Yethu City, in Pretoria, as an example of this.

The new lower entry market rental product reached full residential occupancy within ten weeks.

He informed that the group sees replication potential off the back of this successful pilot, and is talking to multiple parties to invest with it in the Yethu concept, both in terms of using equity and debt.

The portfolio of largely convenience shopping centres recorded reduced core vacancies of 6.9%, or 0.5% when excluding Killarney Mall, which was held for sale during the period.

Rental income grew by 6.2%.

During the reporting period, Octodec invested R102.5-million in developments, improvements and larger tenant installations which are expected to support increased earnings.

During the year, 17 noncore smaller properties were sold for total net proceeds of R152.3-million, at a weighted average exit yield of 9.5%.

One small property, which is complementary to the Rentmeester Office Park, was acquired for R8-million, with a first-year yield of 9.3%.

Also, R1.6-billion of bank funding was successfully refinanced and R155-million in unsecured corporate bonds were issued, all at improved margins.

Octodec’s hedged position was managed throughout the reporting period to benefit from lower interest rates, ending the year at 71.9% of borrowings.

Proceeds from the disposal of properties were applied towards debt, reducing outstanding borrowings from R4.4-billion to R4.3-billion.

The reduction in borrowings, together with a slight increase in the portfolio value led to a decrease in the group’s loan-to-value ratio from 39.2% to 38.2%.

The all-in weighted average cost of borrowings declined from 9.5% to 9.1% and Octodec ended the period with unused available banking facilities of R800-million.

A further R200-million in unsecured corporate bonds was raised post-year end.

In August, Octodec’s board approved a refreshed strategy for the future.

In line with this, five additional properties were disposed of post year-end at a gross consideration of R48.4-million (excluding value-added tax), while management remains intent on executing the sale of Killarney Mall, with interest shown.

Despite tailwinds, economic pressures remain and full year 2026 presents Octodec with the added challenge of addressing large vacancies which recently materialised at two buildings (together 18 959 m²).

The Yethu City concept is actively being explored as a potential solution for the one building (12 086 m²), while management is marketing the other building for relet and considering its disposal.

As a consequence of these vacancies, Octodec expects to achieve growth in distributable income and distribution per share of between 0% and 4% for the 2026 financial year.