Delta Property to shift focus to assets with state tenants

Delta Property Fund will shift its focus to buy only government-tenanted assets in SA as it looks to benefit from its strong relationship with state departments.

CEO Sandile Nomvete said yesterday Delta had managed consistent returns in difficult market conditions because of its exposure to long-lease agreements with government departments.

Delta, a real estate investment trust that pays out nearly all its income, declared a dividend of 42.89c per share for the six months to August, up 7.2% on the comparative period last year.

Delta would rationalise its portfolio by selling off smaller assets that did not have government tenants. These included shopping centres and industrial properties.

“We have a R1.3bn disposal list as we move to focus our South African portfolio on assets with a sovereign underpin. We are selling off properties which are more or less smaller than R100m in value,” Mr Nomvete said.

Delta’s portfolio was valued at R9.1bn at the end of August, including assets held for sale, and consisted of 85 assets with a total gross lettable area of 723,929m².

Mr Nomvete said while Delta would focus on its government-tenanted buildings and improving offerings from these assets, it was continuing to diversify through its holding in Delta Africa, which focused on property investments in the rest of Africa.

Delta Africa, the first panAfrican property fund listed on the JSE, pays distributions in US dollars. This makes it a rand hedge play for investors. It has properties in Morocco, Mozambique and Zambia.

Evan Robins, listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said while Delta’s results were not exciting, they had aspects that would please the market. “They did include the benefit of a share buyback and oneoff income items.

“Headline gearing has improved, which is a good step for the company.”

Delta is expected to make accretive acquisitions in the second six months of its financial year,” said Mr Robins.

Property analyst at Avior Capital Markets, Naeem Tilly, agreed that Delta was not a takeover target.

“I don’t think they are a takeover target. Currently, listed Reits (real estate investment trusts) don’t have an appetite for government space,” he said.