February 19 2024
Delta Property Fund, the office owning landlord which focuses on renting to sovereign tenants is facing more challenges as it to tries to attract new investors and grow its liquidity.
The JSE announced last week that it would censure Delta publicly for breaching listings requirements under its previous executive management, which included founder Sandile Nomvete, saying it misled investors when reporting its financial results from 2018 to 2020.
The JSE also imposed a financial penalty of R7.5m, of which R5m was suspended for five years on condition that Delta does not commit similar offences. This R7.5m penalty was a maximum fee imposable.
The JSE said last Friday that it took Delta’s own forensic probes into account, which unearthed irregular accounting and other practices over the time horizon; the present economic climate; and the remedial action taken by the present executive management, as well as the broader interests of the investing public.
Delta has lost much faith in investors but its new management is trying to sell properties to manage its loan-to-value (LTV) ratio, which stood at 60% in the six months to end-August.
LTV measures a company’s debt relative to its assets and is a health ratio. A safety level is around 40% in the SA market.
The JSE said the accuracy and reliability of financial information published by listed entities played a pivotal role in maintaining a fair, efficient, and transparent market.
“The provisions of the listings requirements, which impose various important obligations on listed companies in respect of the disclosure of financial information, enhance the integrity of the market and promote investor confidence,” it said.
Nomvete, resigned in August 2020 amid allegations of fraud, which he disputed. Other executives also resigned at different times.
The pandemic was followed by a cycle of interest-rate hikes, which further squeezed debt-laden Delta.
In November, the company said it was looking to offload 43 noncore assets valued at R2.2bn. At the end of the interim period, Delta’s property portfolio consisted of 91 properties with a total investment value of R6.9bn.
Its share price was flat at 18c in early trade on the JSE on Friday, having plunged 95% over the past five years. It barely trades now and lacks liquidity with a market capitalisationa around R130m. The fund may need to delist in the future following larg easset sales.
Delta’s board said in December 2020 that a forensic investigation found evidence of past practices involving governance failings and wrongdoing at the company, “including unsubstantiated payments, procurement irregularities and other unethical business dealings”.
The fund has been in legal tussle with Nomvete for years.
alistair@propertyflash.co.za
