Octodec Investments has issued its pre-close operational update for the year ending 31^st August 2025 with the unrepaired damage on Lilian Ngoyi Street continuing to impact its Johannesburg CBD portfolio.

However, the Company says the Johannesburg Road Agency’s restoration efforts appear to be progressing as planned with the initial phase of repairs anticipated to be completed by the end of August 2025. Octodec’s insurance claim for loss of income due to the impact of the damaged street is still in progress with interim proceeds of R4 million received to date.

The Company also notes that Johannesburg CBD continues to frequently experience extended periods of electricity and water interruptions with pressure remaining on landlords to provide alternative solutions to failing council service delivery and infrastructure.

Within its residential portfolio, vacancies followed the same seasonal trend as in prior years with a decrease to 7.9% as at 31^st July 2025 (31^st August 2024: 9.2%) supported by various marketing campaigns to promote its properties as well as the introduction of special rental offerings to attract tenants. However, the REIT says that its residential vacancy percentage did not reduce as much as anticipated due to tenant affordability remaining a challenge.

The decrease in Octodec’s office vacancies to 21.1% (31^st August 2024: 24.3%) was primarily due to the sale of an office building in Joburg and the conversion of vacant office space into a new co-living residential offering, Yethu City – On Sisulu in Pretoria.

The REIT previously reported that the City of Tshwane Metro Municipality, which occupies 12 086m² at its Capitol Towers North, gave notice to vacate at the end of May 2025, only began vacating the building during July 2025 and it is anticipated that the reinstated premises will be handed back to Octodec in October 2025 with various repurpose opportunities being explored.

Its shopping centre portfolio comprising convenience/neighbourhood assets was fully let with vacancies of 0.2% at the end of July 2025 compared to 5.5% on 31^st August 2024. Killarney Mall, which was held for sale, recorded vacancies of 18.5% at the end of July 2025 compared to 17.5% on 31^st August 2024. With decreased vacancies in its retail shops in core CBD nodes, the Company says it anticipates its Johannesburg CBD retail shop portfolio’s performance to improve once the damage on Lilian Ngoyi Street is repaired.

Octodec’s industrial portfolio comprising smaller warehouses and light industrial units recorded a 6.9% vacancy rate for the period, down from 10% as at 31^st August 2024.

Year-to-date collections in its residential and commercial portfolios, as a percentage of total billings, averaged 99.3% (July 2024: 99.7%) and 97.5% (July 2024: 99.9%) respectively with the decrease for its commercial assets mainly due to retail tenants exposed to Lilian Ngoyi Street.

To date, Octodec has disposed of 15 assets for approximately R130 million – a 6.6% discount to book value with the proceeds allocated towards debt reduction and capital investments in existing core properties. It has yet to reach an agreement with regards to the disposal of Killarney Mall and it says it continues to engage with numerous potential buyers.

During the period, Octodec refinanced R1.1 billion in facilities with tenors of up to four years at an improved weighted average margin of approximately 26 basis points with agreements to refinance a facility of R650 million maturing on the 31^st of August 2025. The Company’s borrowings were reduced following the disposal of non-core assets totalling R4.3 billion at the end of July 2025 with its loan-to-value (LTV) ratio expected to remain below 40% in the near term.

Year-to-date, the REIT has concluded interest rate swaps of R2.4 billion including forward starting interest rate swaps of R1.3 billion (concluded for tenors of two to three years at fixed rates of between 6.72% and 7.25%). Its hedged position on 31^st July 2025 was 67.4%. The Company says it has revised its strategy to increase its hedging position to between 70% and 80%.

Its weighted average cost of debt improved to 9.2% at the end of July 2025 compared to 9.5% on 31^st August 2024 due to improved margins on the facilities refinanced and the reduction in the interest rate.

Octodec says growth in its full-year distribution is showing improvement, having upgraded its previous distribution growth guidance of 2% to 4% to growth of 3% to 6%.

The Company’s audited results for the year ended 31^st August 2025 are scheduled for release in late November 2025.