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Real estate investment trust Delta Property Group has declared a distribution of 40.01c per linked unit for the six months ended August 31, an increase of 23.1% on that posted in the first six months of the prior financial year.
Distributable income included R13.7-million of cum distribution, of which R1.8-million related to new linked units issued during the year and R11.9-million to distributable income realised through the disposal of its shares held in Ascension Properties.
The increase in administration expenses, from R15.8-million for the six months ended August 31, 2013, to R25.2-million in the period under review, was in line with an increase in the size of the portfolio, which swelled to 78 properties worth R7.2-billion.
Transaction costs of R41.3-million were incurred related to the cancellation of the property management contract with Motseng Property Services (MPS).
The amount was partially settled by offsetting a loan of R11.3-million owed by Motseng Investment Holdings to Delta, with the balance of R30-million settled in cash.
“Management of the properties previously managed by MPS is now undertaken by MPI Property Asset Management, Delta's appointed asset manager, on a cost-recovery basis,” the company said in an interim results statement on Monday.
ACQUISITIONS & DISPOSALS
The period under review saw the group completing the transfer of the R120.6-million Servamus building, in Durban, as well as disposing of its entire holding of Ascension A-linked and B-linked units to the Rebosis Property Fund for R348.8-million.
Delta, meanwhile, also acquired 23.4-million shares in Delta International Property for R501.3-million, which it said would provide a unique dollar-based exposure to retail and office sector growth in emerging market economies outside South Africa, offering diversification and a rand hedge.
“Delta International offers investors direct access to high-growth opportunities in African real estate, excluding South Africa. This acquisition was partially funded by a dollar-based debt facility from the Bank of China. The balance of the investment was funded through excess available on existing debt facilities,” the company outlined.
Delta would continue to operate as a primarily sovereign and parastatal underpinned fund, supplemented by a level of diversification through Delta International and other future initiatives.
Meanwhile, post period-end, Delta acquired the Old Mutual Centre and The Marine buildings, both in Durban.
LEASE PROFILE
During the year, leases in respect of 41 521 m2, or 6.5% of the portfolio, were renewed.
The weighted average escalation rate across the portfolio was 8% by the end of the first six months of the year, while vacancies ended the six months at 4.7% of the portfolio, which was an improvement on the 5.3% reported in the first half of the prior year.
PROSPECTS
Looking ahead, the group said its asset management team would continue to bed down the existing portfolio and extract maximum efficiencies from the assets.
“Delta will continue to leverage its empowerment credentials and deal-making abilities to further add to its core portfolio of defensive assets, as well as to secure lease renewals and maintain low vacancies,” it noted.
Despite the fact that the South African property market continued to face challenging conditions, with low economic growth and rising costs, Delta remained confident that focusing on fundamentals, such as maintaining a defensive core portfolio; a long lease expiry profile; and actively managing refinancing and interest rate risks, would position it well to achieve double-digit distribution growth in future.