Delta Property Fund, a specialist black-managed and substantially black-owned REIT with a significant sovereign underpin, today reported robust financial results for the half-year ended 31 August 2015.
Distribution growth of 42.89154 cents per share was declared for the interim period, up 7.2% on the comparative prior year period.
Delta CEO, Sandile Nomvete commented:
“These results are indicative of the team’s focus on doing the basics right. We contained operating expenses very well, managed to renew a significant number of leases and successfully concluded yield enhancing acquisitions to the value of R492.3 million, adding an additional 31 782m2 to the portfolio.”
“In line with our strategy, we reduced Delta’s loan-to-value ratio from 49.9% to 46.0% and will gradually reduce debt levels further to 40% relative to income producing assets.”
“To accelerate this process, we have embarked on a strategy to dispose of non-core assets, and will also consider opportunities where capital from the disposal of core assets can be better deployed to higher yielding assets.”
Delta’s portfolio at the reporting date was valued at R9.1 billion (including assets held for sale) and consisted of 85 assets with a total gross lettable area of 723 929 m2. The average property value in the portfolio is R106.8 million with a weighted average rental per square meter for the full portfolio of R101.49.
During the review period, Delta successfully renewed leases in respect of 24 666 m2 and brought forward or filled acquired vacancies of 6 566 m2.
Current refurbishment projects include the redevelopment of CMH House, Durban which is nearing completion to accommodate a CMH show room and 450 parking bays. Management expects the new lease with CMH to commence on 01 November 2015.
A full refurbishment of Commission House, Pretoria at a cost of R30 million is expected to achieve rental uplift and negotiations with a suitable tenant have commenced.
During the review period, Delta maintained its Level 2 B-BBEE Contributor status based on the Property Sector Code Gazetted on 1 June 2012.
“Approximately 60% of our portfolio is tenanted by government, which makes empowerment a business imperative for us. Conversely, we see empowerment conscious tenants increasingly demanding superior compliance as they look to benefit from our 125% BEE recognition level,” Nomvete explained.
Earlier this year Delta made history when shareholders unanimously approved the appointment of a wholly-owned trust established for the benefit of Delta’s black employees as its asset manager. The new asset management company (named Delta Property Asset Management Proprietary Limited) also employed the staff of the previous incumbent.
“The affirmation of our Level 2 B-BBEE Contributor Status supports our vision of being a leader as far as empowerment and transformation in the property industry is concerned.
“We see BEE as a unique opportunity to address the needs of empowerment conscious tenants and as a unique way to incentivise and retain staff, whilst maintaining and improving the standard of Delta’s overall portfolio.”
Nomvete remarked that the South African property market faces increasing headwinds, with low projected economic growth and rising costs.
“Despite these economic challenges we remain positive on Delta’s defensive portfolio and will continue to pursue empowerment sensitive opportunities.”
“Our primary aim is to lower the level of gearing and have already put strategies in place to achieve this in the short-term,” he concluded.
The Group anticipates combined distribution growth for the 2016 financial year of 8% from February 2015 based on stable trading conditions.
Read more here: Delta Property Fund Interim Results ended 31 August 2015