Otodec reports double digit HEPS growth

Octodec, a diversified real estate property group, has reported a 6.4% jump in its annual distributable income after tax, showcasing resilience amidst a challenging property market. The company's profits were bolstered by higher income from its residential portfolio, which helped offset a weaker performance from its retail, office, and industrialized businesses. Jeffrey Wapnick, the Managing Director at Octodec, spoke with CNBC Africa's Fifi Peters to provide insights into the company's strong performance and future outlook. Wapnick discussed the significant increase in dividends, indicating the company's confidence in its financial position and performance. The decision to pay the dividend reflects a positive outlook on the impact of the COVID-19 pandemic on the property sector. With operational conditions returning to almost pre-COVID levels and no current lockdown or restrictions in place, Octodec is demonstrating its stability and growth potential. Wapnick emphasized that the strength of the balance sheet during the lockdown period enabled the company to make sound financial decisions. The residential portfolio emerged as a bright spot for Octodec, driven by increased demand from university students and ongoing upgrades to the apartments. Wapnick highlighted the company's commitment to providing premium accommodation and mentioned plans for further makeovers across the portfolio. Despite the challenging economic environment, Octodec aims to invest in property improvements, subject to balance sheet considerations. The emphasis on enhancing the living experience for residents aligns with Octodec's strategy to differentiate itself in the market. Regarding rising interest rates, Wapnick acknowledged the impact on tenants' behavior and emphasized the necessity of affordable housing options. As interest rates rise, some tenants may opt for shared living arrangements to manage costs. Octodec adapted to this trend by offering shared accommodation at competitive prices, attracting tenants seeking cost-effective yet private living spaces. The company's ability to innovate its offerings in response to market dynamics positions it favorably in the competitive real estate landscape. In contrast, the office portfolio faced challenges due to oversupply and changing work dynamics, such as remote work. Octodec's government-occupied offices remained stable, while commercial tenants in CBD-type spaces experienced occupancy pressure. Wapnick highlighted the uncertainties surrounding traditional office spaces and the evolving nature of work environments post-pandemic. Despite reporting negative reversions and offering COVID-19 discounts, Octodec remains optimistic about occupancy improvements as commercial tenants return to their workspaces. The company anticipates a reduction in office vacancies as economic activities resume and legal services bounce back. In conclusion, Octodec's double-digit growth amidst market challenges showcases its adaptability and strategic approach to property management. The company's focus on enhancing residential living experiences and navigating office market dynamics reflects a holistic business strategy aimed at long-term sustainability. Wapnick's insights underscore Octodec's resilience and potential for growth in a dynamic real estate environment.