Investors will receive a total distribution for the year to 31 August 2008 of 122,6 cents per linked unit, some 15.4% higher than that of the 106,2 cents paid for the prior year.

During the year Octodec’s rental income and net rental income increased by 19.1% and 14.6% respectively. Taking into account prevailing market rentals, occupation levels and capitalisation rates, the value of Octodec’s property portfolio increased by R81,9 million, driving up net asset value by 5.9% to 1556 cents per linked unit.

Octodec Investments Limited Managing Director, Jeffrey Wapnick, attributes this positive performance to a substantial saving in finance costs, which was achieved as a result of the issue of additional units towards the end of the previous financial year. “This together with the benefits of the redevelopment of properties, favourable renewal of leases and strict expense control have all contributed to the growth in distributable earnings,” says Wapnick.

Octodec’s distributable earnings have grown over the last five years ahead of the sector average.  However Wapnick comments that these growth levels may not be sustained due to the difficult retail trading environment.

Wapnick is realistic about the current market conditions, but remains judiciously confident about Octodec’s performance. “Tough trading conditions are expected to continue and will impact on distribution growth. International markets are depressed and the effects continue to spill over into the domestic economy. Rental growth is expected to slow and higher operating costs and interest are expected to impact on profitability. However, we believe that Octodec is in a position to maintain, and even improve, future distributions,” says Wapnick.

Octodec’s total investments exceed R2,3 billion. Its core portfolio, comprising properties held for at least 12 comparable months, reflects rental income growth of 8.7%.

Comprising five quality shopping centres - Killarney Mall, Woodmead Value Centre, Gazina City, Elardus Park Shopping Centre and Waverley Plaza - Octodec’s retail portfolio continued to enjoy growth in rental income although, reports Wapnick, this was at a slower rate than previous years.

Bad debt increased marginally during the period from 1.5% to 1.7% of revenue with policies and procedures relating to the collection of rent being a continued focus for management.

“Octodec continued to unlock the value of its Johannesburg and Pretoria CBD portfolios through redevelopment and refurbishment,” points out Wapnick. In this regard, the R10 million redevelopment of the mixed-use property Fine Art in Johannesburg was completed and the residential component of the property is nearly fully let. The Tiny Town residential development, situated adjacent to the Union Building, is due to commence shortly.

Growing its portfolio, Octodec purchased and transferred three properties for an aggregate cost of R86 million during the year: Pretoria office block Rentmeester situated in Val-de-Grace and the residential block Union Club in the Jo’burg CBD.

The vacancies are at 19.4% of total lettable area which includes properties acquired where little or no consideration was paid for the vacant space, and offers excellent potential to extract value and grow distributions.

Interest income and dividends Octodec received from associate company IPS increased to R13 million due to the strong performance of IPS’s portfolio as well as the advance of additional funds to IPS to fund IPS’s growth. IPS’s property portfolio is valued in an amount of in excess of R790 million in addition to its residential development pipeline of 977 residential units at an investment cost of R339 million.

The majority of these units will be built at Kempton City in Kempton Park, Tayob Towers and Corporation Place in the Jo’burg CBD.

Octodec’s gearing at the end of the financial year was 28%, as against 24% at 31 August 2007 and interest rates in respect of 81% of borrowings at 31 August 2008 have been fixed at an average interest rate of 11% maturing at various dates ranging from October 2008 to April 2018. Octodec remains financially sound with facilities available in excess of R230 million to fund future cash flow requirements.