Roy Cokayne
DELTA, the listed property fund, believes its decision not to pursue the proposed tripartite merger with listed Rebosis and Ascension Properties has already been vindicated.
Sandile Nomvete, the chief executive of Delta, said yesterday that the rationale of the proposed tripartite merger was never in question but the timing of the merger was “inopportune”.
He said the decision not to proceed with the merger had enabled Delta to act on other opportunities, some of which had been realised, including the stake in Delta International. Other opportunities were continuously explored and were in various stages of completion.
He said the R501 million stake in Delta International provided unique dollar-based exposure to retail and office sector growth in emerging market economies on the African continent, outside South Africa, offering diversification and a rand hedge.
He added that Delta International was the JSE’s first property company to directly invest in real estate outside South Africa and currently offered a unique exposure to Morocco and Mozambique.
Nomvete said Delta would continue to operate as a primarily sovereign and parastatal underpinned fund, supplemented by a level of diversification through Delta International and other future initiatives.
The proposed merger between three listed property funds would have created the largest black economic empowerment property fund listed on the JSE with a property portfolio valued in excess of R16.5 billion and a market capitalisation of R9.5bn. But it was called off in June.
This resulted in Delta disposing of its entire holding of Ascension A-linked units and Ascension B-linked in July to Rebosis for R348.8m cash.
Delta yesterday reported a 23 percent increase in distributions a linked unit to 40.01c for the six months to August from 32.51c in the previous corresponding period.
Contractual rental income grew by 102 percent to R442.3m from R218.9m.
The fund’s portfolio at the end of August comprised 78 properties valued at R7.2bn and the R501m investment in Delta International.
Delta is black managed and a level 2 broad-based empowerment contributor, qualifying it for long-term government leases in terms of the Department of Public Work’s incubator programme.
Its strategy has been to operate as a predominantly government-tenanted fund, with 63 percent of gross rental income derived from the government office sector.
Overall portfolio occupancy improved to 95.3 percent from 94.7 percent, with lease renewals on 6.5 percent of the portfolio’s gross lettable area renegotiated in the reporting period at a weighted average escalation rate of 8 percent.
Administration expenses rose by almost 60 percent to R25.2m from R15.8m.
Nomvete said this increase was in line with the increase in the size of the portfolio.
“I’m very pleased with the results.
“Following our decision not to proceed with the tripartite merger in June this year, the team refocused on delivering against its high-growth mandate.
“Since listing in 2012 we maintained our growth trajectory. Today the portfolio is valued at R7.3bn, compared to R2.1bn at listing.
“Going forward, our aim is to reduce the loan-to-value ratio to more comfortable levels in the medium term to provide us with headroom for further growth,” he said.
Nomvete said the property market continued to face challenging conditions, with low economic growth and rising costs.