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Pre-close operational update and updated guidance
OCTODEC INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1956/002868/06)
JSE share code: OCT
JSE alpha code: OCTI
ISIN: ZAE000192258
LEI: 3789I36JI0BKTUSZ8813
(Approved as a REIT by the JSE)
("Octodec" or "the company" or "the group")
PRE-CLOSE OPERATIONAL UPDATE AND UPDATED GUIDANCE
Octodec management is pleased to present this pre-close operational update for the year ending 31 August 2025, which
covers the eleven months from 1 September 2024 to 31 July 2025, unless otherwise noted.
Sector update
Despite a challenging economic environment, lower inflation combined with lower interest rates has had a positive
effect on market and consumer sentiment, which in turn has supported improved occupancy and rental growth across
our diversified portfolio.
The Johannesburg CBD continues to frequently experience extended periods of electricity and water interruptions, with
pressure remaining on landlords to provide alternative solutions to failing council service delivery and infrastructure.
The Johannesburg CBD portfolio performance is also continuing to be impacted by the unrepaired damage on Lilian
Ngoyi Street, caused by a gas explosion in July 2023. The Johannesburg Roads Agency's restoration efforts, however,
appear to be progressing as planned, with the initial phase of repairs anticipated to be completed by 31 August 2025.
The insurance claim for loss of income due to the impact of the damaged street is still in progress, with interim proceeds
of R4.0 million, inclusive of Value Added Tax received to date.
Sector vacancies (%) 31 July 2025 31 August 2024
Residential 7.9% 9.2%
Offices 21.1% 24.3%
Retail – street shops 12.1% 14.0%
Retail – shopping centres (Including Killarney Mall) 7.0% 10.1%
Industrial 6.9% 10.0%
Within the residential portfolio, vacancies followed the same seasonal trend as in prior years, with the reduction in
vacancies supported by various marketing campaigns to promote our properties as well as the introduction of special
rental offerings to attract prospective tenants. The vacancy percentage did not, however, decrease as much as anticipated
due to tenant affordability remaining a challenge.
The decrease in office vacancies was mainly due to the sale of an office building in Johannesburg and the conversion of
vacant office space into our new co-living residential offering, Yethu City – On Sisulu in Pretoria ("Yethu City").
We previously reported that the City of Tshwane Metropolitan Municipality ("CoT"), which occupies 12,086m2 at
Capitol Towers North, gave notice to vacate at the end of May 2025. CoT only began vacating the building during July
2025, and it is anticipated that the reinstated premises will be handed back to Octodec in October 2025. Various
opportunities to repurpose this office building are being explored.
In regard to government leases, we await feedback from the Minister's office on the renewal of lease agreements with
the Department of Public Works, which remain on a monthly tenancy while negotiations are underway.
The decreased vacancies within retail street shops reflect continued strong demand from quality tenants in high footfall
areas within core CBD nodes. We anticipate that our Johannesburg CBD retail shops' portfolio performance will
improve once the damage on Lilian Ngoyi Street is repaired.
The retail shopping centre portfolio of convenience/neighbourhood type properties located in high-demand areas was
virtually fully let with vacancies of 0.2% at the end of July 2025, compared to 5.5% on 31 August 2024. Killarney Mall,
which is held for sale, recorded vacancies of 18.5% at the end of July 2025 compared to 17.5% on 31 August 2024.
Our industrial portfolio, which consists of smaller warehouses and light industrial units, also remains in demand. The
letting of a few larger vacancies in our Silverton industrial node in Pretoria largely supported the decrease in vacancies.
A tenant, which occupies 6,873m2 at the Talkar property situated in the Hermanstad industrial area in Pretoria, will
vacate at the end of August instead of July as previously indicated. We are actively marketing and sourcing prospective
tenants for this property.
Collections
Year-to-date collections in the residential and commercial sectors, as a percentage of total billings, averaged 99.3%
(July 2024: 99.7%) and 97.5% (July 2024: 99.9%), respectively. The decrease in commercial collections is mainly due
to retail tenants exposed to the unrepaired Lilian Ngoyi Street and one tenant that is currently under business rescue.
Financial update
During the period, we refinanced R1.1 billion in facilities with tenors of up to four years at an improved weighted
average margin of approximately 26 basis points. Agreements to refinance a facility of R650 million maturing on
31 August 2025 have been signed and will be implemented accordingly.
Borrowings were reduced following the disposal of non-core properties and accordingly totalled R4.3 billion at the end
of July 2025 compared to R4.4 billion on 31 August 2024. Octodec's loan-to-value ("LTV") is expected to remain
below 40% in the near term, and it is the company's strategic objective to reduce this to 35% in the long term.
Year-to-date, we have concluded interest rate swaps of R2.4 billion, including forward starting interest rate swaps of
R1.3 billion. The forward-starting interest rate swaps were concluded for tenors of two to three years at fixed rates of
between 6.72% and 7.25%. The hedged position on 31 July 2025 was 67.4% and considering the interest rate cycle,
Octodec has revised its strategy to increase the hedging position to between 70% and 80%. Accordingly, Octodec has
commenced the process of gradually increasing its interest rate swap exposure as opportunities present themselves.
The weighted average cost of debt improved to 9.2% at the end of July 2025, compared to 9.5% on 31 August 2024,
due to improved margins on the facilities refinanced and the reduction in the interest rate.
Acquisitions and disposals
To date, we have successfully disposed of 15 properties for approximately R130 million, a 6.6% discount to book value.
The proceeds have been allocated towards debt reduction and capital investments in existing core properties and value-
unlocking opportunities like Yethu City.
The process of reaching agreement to dispose of Killarney Mall continues, and we will announce the disposal once an
agreement of sale has been signed. While we continue to engage a number of potential buyers, discussions with a certain
party are further along than others.
Management continues to focus on aggressively disposing of non-core properties and consequently increasing the
average value of the properties invested in.
Distribution outlook
The lower interest rate is expected to contribute to improved economic conditions, with reduced pressure on both
consumers and businesses anticipated to unlock opportunities for growth within Octodec's portfolio.
In addition, the extended stay of tenants at our Capitol Towers North and Talkar properties, as mentioned above, has
positively impacted Octodec's rental income for the period.
As a result of the above factors, the growth in full-year distribution is showing improvement, and we therefore upgrade
the previous distribution growth guidance of 2.0% to 4.0% to a growth of 3.0% to 6.0%.
This forecast is based on the following key assumptions:
- Forecast property income is based on contractual rental escalations and market?related renewals;
- Adequate allowance has been made for known vacancies and rent reversions;
- No major corporate and tenant failures will occur;
- No further changes in interest rates will be made; and
- No unforeseen events will occur.
This revised outlook for the year ending 31 August 2025 has not been reviewed or reported on by the group's auditors.
The audited results for the year ending 31 August 2025 are scheduled for release on 25 November 2025.
21 August 2025
Sponsor
Java Capital
Debt Sponsor
Nedbank Corporate and Investment Banking,
(a division of Nedbank Limited)
Investor relations advisor
Instinctif Partners
Contact person: Louise Fortuin/Liz Ferreira
E-mail: octodec@instinctif.com
Date: 21-08-2025 03:00:00
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