Property Flash


Delta Property Fund, the majority black-owned and managed real estate investment trust (Reit) has decided to buy a significant number of non-state tenanted properties for the first time as the company looks to diversify against the risks of being heavily invested in only one type of tenant.

As much as 84% of the Reit’s rental income was derived from state tenants, in the year to end-February 2022, results released on Tuesday May 24 showed. Recently appointed CEO Siyabonga Mbanjwa said a turnaround strategy had been gaining traction for Delta as it tried to sort out its high vacancy rate and high relative debt levels.

“This is my maiden set of financial results, having joined Delta in February this year, and I am delighted to report that the turn-around strategy implemented by the board is increasingly gaining traction despite serious macro-economic and sectoral headwinds,” said Mbanjwa.

“We have enhanced our internal controls and bolstered our staff complement and competencies, allowing us to focus on the renewal of long outstanding leases and continued execution on our capital expenditure commitments to ensure that our assets meet our tenants’ requirements,” he said.
“Now we need to buy assets outside of the state office space so as to decrease our reliance on one type of tenant. Sometimes government processes can be slow which puts us at risk,” said Mbanjwa.

Delta would look at buying traditional asset types such as office, retail and industrial but also consider conversions such as converting existing offices to student housing and other residential properties in the CBDs of SA.  

Vacancies increased during the period from 27.2% to 31.3%, including buildings to be renovated before letting. However, asset disposals and other letting activities were expected to reduce vacancies significantly in the near term, with 26 properties with a market value of R787m earmarked for disposal.

Delta’s property portfolio consisted of 99 properties with a total investment value of R7.9bn and a gross lettable area of 909 530m2 at the end of February 2022.

The group’s loan-to-value (LTV) increased slightly from 56.5% in the prior year to 57.0%. The interest cover ratio, which is a measure of Delta’s ability to service debt, however remained stable at 1.9 times due to the low interest rate environment following the reduction in the repo rate during the reporting period and the ongoing amortisation of debt by the group. 

Based on its disposal programme and leasing initiatives, Delta is targeting an LTV of 40% for its 2024 financial year. Fund managers prefer for SA property companies’ LTVs to sit between 30% and 40%.

Delta did not declare a dividend during the period and is planning to resume dividend payment based on the success of its turn-around strategy. As a Reit it is required to distribute at least 75% of its distributable earnings as a dividend each financial year.

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