Louis Schnetler, CEO of Delta International.
Delta International Property Holdings Limited (“Delta International”) is the first multi-listed property fund to directly invest north of South Africa in select lucrative and fast-growing African property markets, mainly Mozambique and Morocco.
Currently listed on the Bermuda Stock Exchange (BSE)* and the Alternative Exchange of the Johannesburg Stock Exchange (JSE) in South Africa, the fund offers international property investors direct access to immediate high growth opportunities on the African continent.
Delta International today announced its maiden interim distribution of 6.63 US cents per share following its first six months of operation as a focused fund specialising in premium real estate assets in high-growth economies in Africa, excluding South Africa.
During to the reporting period, Delta International acquired two assets – the Anadarko Building, a
7 805 m2 GLA office building located in the affluent suburb of Sommershield, Maputo, Mozambique. The building is anchored by Anadarko Petroleum Corporation, with a lease term of 15 years which commenced in June 2013. It has a weighted average lease expiry (“WALE”) of 10.42 years.
The second asset introduced into the portfolio was Anfa Place, a 30 711 m2 GLA shopping centre located in the prestigious suburb of Anfa in Casablanca, Morocco. The shopping centre is anchored by the likes of Carrefour, Marks & Spencer, H&M and Virgin Megastore and has a WALE of 7.54 years.
The Fund currently derives 72% of its revenue (by value) from Morocco and 28% from Mozambique.
“We operate in a complex and challenging environment and had to deal with extraordinary challenges during our first phase of investment, many of which were outside of our control. I am very proud of the achievements made by the team to date,” commented Louis Schnetler, CEO of Delta International.
From acquisition on 25 July 2014 of Anfa Place Shopping Centre in Morocco to 31 December 2014, the Moroccan Dirham depreciated by 10.1% against the US Dollar. The weaker exchange rate resulted in a reduced US Dollar based rental income of US$0.47 million being realised.
“Delta International was well supported by the market, successfully raising US$87 941 691 during the reporting period through the issue of new shares. The equity, together with new debt facilities were used to acquire the initial properties and two additional strategic properties in Mozambique after the reporting period,” continued Schnetler.
On 23 January 2014, the Group acquired the Hollard Building for a purchase consideration of US$14.1 million. The three storey building, comprising 4 945 m2 GLA of commercial offices and a small café, is located in the rapidly emerging new downtown CBD of Maputo, Mozambique. The WALE is 3.6 years and the property yield in year one is 10.43%. The Hollard Building is 100% occupied and is anchored by KPMG and other A-grade tenants including Hollard Insurance, British Petroleum, British Council and Barclay’s Bank. Other tenants in the area include the headquarters of Millennium Bank, USAID, Vale as well as various international oil and gas producing companies.
In addition, Delta International is in the process of finalising the previously announced acquisition of the iconic Vodacom Building, located in a prime position in one of the fastest growing hubs in Maputo, Mozambique. It is in close proximity of the Hollard building. Transfer is expected by the end of March 2015. This multi-storey building was completed in December 2010 and is single tenanted by the Vodacom Group Limited under a 10+10 year fully maintaining lease which commenced on 1 January 2011.
“In contrast to Morocco, the contractual rentals in Mozambique are denominated in US Dollars,” Schnetler explains. “With the discovery of oil and gas in Mozambique and a resultant influx of foreign direct investment we also anticipate local companies to continue expanding at a rapid pace.
“This of course bodes well for the property market, especially in the office sector in high-growth nodes such as Maputo. Delta International has identified a solid acquisition pipeline in Mozambique for property consisting mainly of offices, and a small prominent retail property,” he said.
The development of phase two of the Anadarko Building is expected to commence in 2015. “In addition to the net rental income to be generated on the pre- leased building, Delta International will share in the development fee without taking any developmental risk, reflecting our existing interest in the land,” Schnetler explained. The development will be pre-committed with a long-term lease to Anadarko.
During the reporting period, the Fund implemented measures to optimise the tenant mix at Anfa Place Shopping Centre, which reflected a 91% occupancy rate (88% at transfer date). Anfa Place hosts high quality international brands such as Carrefour, H&M, M&S and Virgin Megastore. “The reaction of tenants and shoppers, as well as feedback in a meeting with the Governor of Casablanca, was very positive and we expect these measures to contribute to the mall’s yield going forward,” said Schnetler.
The centre is an early phase mall, having been operational for 24 months and forms part of a mixed use complex, including offices, residential apartments, a Four Seasons Hotel (opening in mid- 2015) and a Pestana hotel.
The Fund’s objective is to bed down the existing assets, and to further increase the asset base with quality assets in Mozambique and Morocco. Delta International in general does not assume development or leasing risk and will not acquire incomplete developments with unsecure income streams or vacant buildings with no immediate lease or income generating ability.
Investment decisions are made based on tenant quality, tenure and sustainability thereof as well as meeting yield objectives.
Delta International’s first phase growth strategy is to establish critical mass in Mozambique and Morocco. Thereafter the Fund plans to prudently expand over time into other opportune markets.