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Octodec‚ Premium Properties report double-digit growth

25 Oct 2013

Sister property groups Octodec Investments and Premium Properties, both headed by Jeffrey Wapnick reported double-digit distribution growth‚ beating the market average of about 6.5%.

Converted offices are proving to be a sound investment for Octodec and Premium. Image: City of Jo'burg

Octodec reported distribution growth of 14.8% to 157.6c per linked unit for the year to August‚ while Premium reported 10.3% growth to 66.2c per linked unit for the same six months. Wapnick said the results were good given prevailing economic conditions in SA.

"Octodec and Premium converted into real estate investment trusts (Reits) last month and may merge into one listed entity‚" Wapnick said.

Managed by City Property‚ Octodec and Premium have significant exposure to the residential sector‚ which is more management intensive than other sectors.

The companies have converted various formerly dilapidated office buildings into higher-end residential units and now manage more than 11‚000 residential units‚ mainly in the Pretoria and Johannesburg central business districts. The value of Octodec's and Premium's current projects is about R600m. If planned projects are included‚ this number rises to more than R1bn.

Rental income up

Wapnick said Octodec had executed a strategy, which saw rental income rise after various value-enhancing upgrades and a proactive approach to letting.

Octodec Investments has a 14% shareholding in Premium Properties. Both Octodec and Premium have a 40% shareholding in IPS Investments.

Reit legislation ensures more consistent tax treatment for property loan stocks and property unit trusts‚ and consistency with international standards and removes the capital gains tax when properties are sold.

Octodec's rental income and net income increased 10.6% and 7.2%‚ respectively‚ year-on-year.

The core portfolio representing those properties held for the previous comparable period‚ with no major development activity‚ reflected rental income growth of 6.7%. Wapnick said the increase in revenue was mainly because of contractual extensions‚ improved letting and an increase in the recovery of utility assessment rate charges.

Premium's rental income and net rental income increased 10.5% and 6.4%‚ respectively.

Bad debts‚ write-offs and provisions fell from 1.4% to 0.4% of total tenant income.

Source: I-Net Bridge

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