Delta Property Fund Limited has reported its unaudited condensed consolidated interim results for the period ending August 31, 2023. The financials reveal a resilient performance despite the persistently challenging economic environment. Delta, guided by a reinvigorated executive team, is strategically focusing on achieving maximum total return on capital while maintaining alignment with a diversified, risk-managed real estate investment portfolio.
Delta’s strategic initiatives are reflected in key salient features that underscore the company’s commitment to financial resilience and long-term sustainability. The following highlights define Delta’s current financial landscape:
The positive financial performance is attributed to Delta’s meticulous implementation of its strategy, which encompasses portfolio optimization, debt reduction, cost optimization, lease renewals, and reducing vacancies. Despite the persistently challenging economic environment, Delta has successfully navigated through these headwinds.
Delta’s focus on portfolio optimization through the disposal of selected properties has contributed to the positive financial outcomes. Notably, the company reported a fair value gain of R12.5 million, primarily from its investment in Grit Real Estate Income Group (“Grit”). Dividend income of R5.8 million was received from the Grit investment.
Delta has undertaken significant debt refinancing efforts, renewing debt totalling R3.1 billion, positively impacting the weighted average debt maturity by 73.0%. Additionally, the company successfully concluded a revolving credit facility of R37.5 million with Nedbank, earmarked for working capital, capital expenditure, and tenant installations.
Property disposals have been a key part of Delta’s strategy, with one property transferred for R44 million during the reviewed period. Post the interim period, an additional property was sold for a gross consideration of R5.4 million. Four properties contracted with conditions precedent are expected to transfer within the next six months for a total consideration of R118.6 million. The proceeds from these disposals will be utilized to reduce the Group’s debt facilities.
Delta renewed 23 leases totaling 97,045m² and concluded 5,526m² of new leases. This strategic move has improved the weighted average lease expiry to 15.8 months. However, vacancies increased from 32.9% to 34.5%, mainly due to a reduction in the CMH property GLA upon remeasurement.
The weighted average rental across the portfolio decreased from R125.33/m² to R114.64/m² compared to the prior period, primarily due to rental reversions, particularly in the Limpopo portfolio. Despite this, Delta’s average rental collections against billing remained high at 101.5% for the review period.
Delta’s financial outlook is optimistic, with the company actively implementing its strategic initiatives. Positive stakeholder engagements nationwide have resulted in negotiations for both lease renewals and new leases. The company anticipates securing new leases for currently vacant properties and continuing lease renewals, contributing to an improvement in the weighted average lease expiry and sustained positive cash generation.
The prospects paragraph in the announcement emphasizes that the Group is on the right trajectory to achieve positive outcomes, and there is measured progress in divesting non-core properties, considering prevailing market conditions. It’s important to note that the prospects paragraph has not been audited, reviewed, or reported on by the Group’s independent external auditors.
Delta Property Fund’s robust performance amid economic challenges underscores the effectiveness of its strategic initiatives. The company’s focus on portfolio optimization, debt reduction, and efficient cost management has contributed to positive financial outcomes. As Delta continues to navigate the dynamic real estate landscape, its commitment to stakeholder engagement, lease renewals, and strategic disposals positions the company for sustained growth in the South African real estate market. Investors and stakeholders are encouraged to review the full announcement for a comprehensive understanding of Delta’s financial performance.