Octodec to revisit distribution policy


Octodec to revisit distribution policy

Published Date: 2020-07-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

Octodec to revisit distribution policy

After withholding an interim distribution, the real estate investment trust says it will decided on its policy with its full-year results.

Octodec Investments says it will revisit its current distribution policy due to the ongoing uncertainty around the future impact of Covid-19 on the economy and its own future financial performance. It has also guided investors to expect a decline in its profitability for the year.

In a trading statement, the property group said distributable earnings for the year to end-August were likely to be at least 15% below last year, with a corresponding decrease in its distribution per share (DPS). It uses DPS as the main indicator of its performance. In April, it decided not to pay an interim dividend for the six months to end-February and withdrew its previous distribution guidance due to the possible fallout from the pandemic.

Octodec's policy has been to pay out 100% of distributable earnings taking into account its commitment to cash preservation and balance sheet management and potential amendments to the legislation governing real estate investment trusts (REITs).

At the end of February, Octodec had a portfolio of 280 properties worth R12.6 billion. It invests in various property sectors, including the defensive residential sector, focusing on properties that offer affordable rentals in densely populated urban areas. These are mostly in the Tshwane and Johannesburg CBDs. Just over two thirds of its rental income is derived from its Tshwane-based properties, with the rest coming from Johannesburg rentals.

It said impact of the lockdown restrictions on its operations had been challenging. While the operating environment remained fluid, trading conditions had improved as the economy progressively reopened. The majority of commercial tenants were afforded discounts rather than deferments or payment plans, especially small, medium, and micro enterprises, which continued to be the most affected. On the retail front, Octodec said its shopping centres and shops were well located and had been supported by customers. Its residential portfolio also remained resilient with relief measures only provided under exceptional circumstances and mostly in the form of payment plans.

After dipping to 66% as a percentage of billings in April, rent collections improved to 74% in May and 91% last month. Ahead of the lockdown, March's billings reached 98%.

The fund said it would publish a further trading statement once it had more certainty on the difference between this year's distribution and last year's payout. A final decision on its DPS would be made at a board meeting on 13 November ahead of the release of 2020 to 16 November, subject to no delays as a result of Covid-19.

Its shares rose 6.3% to R6.37 on Friday.

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