Companies / 28 October 2016, 09:01am / Roy Cokayne
Pretoria - JSE-listed Delta Property Fund believes its track record, the quality and strategic location of its assets and its industry leading empowerment credentials positioned it well to take advantage of the new government leasing framework.
Delta chief executive Sandile Nomvete said yesterday that the recent roadshows and communication by the Public Works Department about the re-emergence of long-term leases provided significant opportunity for value enhancement to Delta’s positioning and ability to implement on the framework proposed by the Public Works Department’s property management trading entity.
“Highlights of the framework in its current format include occupancy of appropriate space at market-related rentals, longer-term rentals for empowered landlords on a sliding scale, the standardisation of lease agreements and office specifications as well as the roll out of an automated payment system to increase efficiencies,” he said.
Listed Redefine Properties last year sold about 60 percent of its “troublesome” portfolio of government-tenanted offices to Delta Property Fund for R1.25 billion, largely because of the company's inability to get longer-term government leases in line with the policy of the Public Works Department to only enter into long-term lease agreements with empowered landlords.
Delta is a specialist black-managed and substantially black-owned real estate investment trust (Reit). Its primary focus is on long-term investment in quality, rental generating properties situated in strategic nodes attractive to the national government and tenants requiring empowered landlords.
Delta property portfolio at the end of August was valued at R11.4bn, including assets held for sale, and comprised 115 properties with a total gross lettable area of 1028m2.
National government accounted for 40.4 percent of tenants by gross lettable area, provincial government 14.7 percent, local government 4.2 percent and state-owned enterprises 11.8 percent.
The remainder of its tenant profile was retail (6.8 percent), industrial (3.1 percent) and other offices (19 percent).
Delta yesterday reported a 7.1percent growth in distributions a share to 45.93c for the six months to August from 42.89c in the previous corresponding period.
Contractual rental income increased almost 31 percent to R757.2m from R578.5m.
Nomvete attributed this growth largely to acquisitions concluded during the period.
Property operating expenses increased 30.8 percent to R206.3m from R158m in line with the growth in the portfolio.
Like-for-like net property income increased by 5.2 percent in the period.
Administrative expenses rose 13.7 percent to R41.3m from R36.4m, also primarily because of the larger portfolio, which resulted in increased asset management fees and related costs.
Driven by acquisitions and interest rate hikes during the reporting period, net finance costs increased almost 17Âpercent to R215m from R184m.
Vacancies were almost unchanged at 9.2 percent.
“During the reporting period we successfully reduced Delta’s loan-to-value ratio to 41.0 percent from 47.2 percent at year-end, we settled or refinanced R832 million of debt and managed to renew leases to the extent of almost 60Â000m.”
Nomvete said property market macro conditions were expected to remain challenging but they were confident of achieving a full year distribution growth of between 7 percent and 7.5 percent.
Shares in Delta rose 0.94 percent yesterday to close at R7.50 on the JSE.