Cash preservation measures undertaken have supported Octodec’s liquidity profile. These include the FY20 partial dividend retention and limit on capital expenditure to essential requirements. The REIT also has around R315m in undrawn facilities. This compares to relatively low refinancing requirements. Accordingly, GCR estimates a robust liquidity coverage ratio in excess of 3.0x over the next 12 months, thereafter easing towards the 1.0x level due to some sizeable debt maturities falling due during FY22 and the assumption that larger dividend payments will resume.
Octodec’s portfolio quality assessment is constrained by high concentration to properties in the inner cities of Pretoria and Johannesburg, although this is counterbalanced by a very granular asset and tenant profile. We also note that despite the largely short-dated weighted average expiry profile, high core vacancies (1H FY20: 11.7%) and exposure to SMMEs, Octodec continues to achieve sound tenant retention and asset performance, with the relatively short lease profile helping to effectively manage bad debts and letting activity.
GCR has considered the progression in portfolio quality since the Octodec and Premium Properties Limited merger in 2014. The REIT continues to demonstrate a clear strategic focus, with progression in its portfolio value underpinned by urban renewal initiatives. Overall, Octodec’s portfolio has achieved moderate YoY growth in value in recent years, with the disposal of non-core properties partly offsetting the impact of enhancements.
|Issue Name||Rating||Country||Rating Published|
|--||Short Term rating: A2(ZA); Outlook: Negative||South Africa||01-07-2021 0:00:00|
|--||Long Term Rating: A-(ZA); Outlook: Negative||South Africa||01-07-2021 0:00:00|