Delta Property Fund Limited has recently unveiled its proposal to sell its property located at 5 Walnut Road, Durban, as part of its strategic portfolio optimization strategy. The company has signed an offer to purchase agreement with UBUD Development Proprietary Limited for a cash consideration of R46 million.
Delta Property Fund Limited, a prominent real estate investment trust (REIT) incorporated in South Africa, is taking significant steps to streamline its portfolio by disposing of non-strategic assets. In line with this strategy, the company has decided to sell its property situated at 5 Walnut Road, Durban, known as Portion 2 of Erf11715. The proposed disposal will include both immovable and movable assets.
The offer to purchase (OTP) has been signed between Delta Property Fund Limited, referred to as the “Seller,” and UBUD Development Proprietary Limited, the “Purchaser.” The ultimate beneficial shareholder of UBUD Development Proprietary Limited is Mr. PW Otto. The cash consideration for the property is set at R46 million, and the deal is subject to the necessary terms and conditions.
This strategic move is driven by Delta’s commitment to optimizing its portfolio and focusing on assets that align with its long-term objectives. The net proceeds from the disposal, estimated at R46 million, will be utilized to reduce debt and the Loan to Value (LTV) ratio by 0.2%, bringing it down from 58.2% to 58%. Furthermore, the proceeds will contribute to lowering the vacancy levels by 0.3%, decreasing it from 33.9% (as of August 31, 2022) to 33.6%.
The completion of the transaction and the transfer of the property into the name of the Purchaser is anticipated to occur around September 30, 2023. However, this timeline is subject to the registration of transfer and formal agreement between both parties.
The Disposal Consideration for the property is set at R46.0 million, exclusive of VAT. The Purchaser will pay a non-refundable deposit of R6 million within seven days of the joint signature of the OTP. The remaining R40 million will be secured by guarantees provided to the Seller, which are expected to be delivered within thirty business days following the payment of the non-refundable deposit.
The completion of the disposal is contingent upon the execution of a formal agreement of sale that will incorporate the terms and conditions of the OTP. If the agreement is not reached within ten days of acceptance of the OTP, the Purchaser reserves the right to cancel the OTP without any claims against either party.
5 Walnut Road, situated in Durban, boasts a gross lettable area of 13,677m². As of August 31, 2022, the property had a weighted average rental rate of R90.16/m². However, it incurred a net operating loss of R0.499 million during the same period. The property’s value as of August 31, 2022, was estimated to be R50 million, while the vacancy rate stood at 46.3%.
The proposed disposal of 5 Walnut Road falls under Category 1 transactions as per the JSE Listings Requirements, necessitating shareholder approval. Delta Property Fund Limited plans to distribute a circular within 60 days, which will include a notice of the general meeting and comprehensive details regarding the disposal.
In a related announcement, Delta Property Fund Limited informed shareholders that the JSE Limited has granted an extension to the posting of the DMFT Disposal circular. The circular, which will incorporate a notice of the general meeting and full details of the DMFT Disposals, will now be distributed to shareholders no later than July 31, 2023. This extension allows the company to conclude the long-form agreements pertaining to the DMFT Disposals.