Wrap Text
Unaudited condensed
consolidated interim results
for the six months ended 31 August 2013
Delta Property Fund Limited
(formerly Tuffsan 89 Investment Holdings Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT ISIN: ZAE000172052
("Delta" or "the Fund")
REIT status approved
Unaudited condensed
consolidated interim results
for the six months ended 31 August 2013
Highlights
- Distribution of 32.51 cents
per linked unit met
- Property
portfolio value
exceeds
R4.8 billion
- Market
capitalisation of
R2.98 billion
- 94.7% occupancy rate
across the portfolio
- Attractive forward
funding rates of
7.7%
- Leases renewed
for 39 533 m2
- Successful
R190 million inaugural
commercial paper
issuance
- Favourable GCR
credit rating
Abridged consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months for year
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Revenue
Contractual rental income 218 950 30 630 116 867
Straight line rental income accrual 23 902 23 082
242 852 30 630 139 949
Property operating expenses (51 216) (2 703) (27 553)
Net property rental and related income 191 636 27 927 112 396
Other income 17 10
Administration expenses (15 813) (481) (11 793)
Net operating profit 175 840 27 446 100 613
Fair value adjustments 34 315
Profit from operations 175 840 27 446 134 928
Finance costs (52 586) (17 517) (55 446)
Interest received 2 558 2 357 5 836
Antecedent interest 16 004
Transaction expenses (9 841) (21 659)
Restructuring expenses (10 000) (20 000)
Profit before debenture interest and taxation 131 975 2 286 43 659
Debenture interest (116 738) (39 068)
Profit before taxation 15 237 2 286 4 591
Taxation (7 047) (2 096) (21 916)
Profit (loss) for the period 8 190 190 (17 325)
Other comprehensive income
Total comprehensive profit (loss) for the period 8 190 190 (17 325)
Reconciliation of earnings, headline earnings and
distributable earnings
Total comprehensive profit (loss) for the period 8 190 190 (17 325)
Debenture interest 116 738 39 068
Earnings 124 928 190 21 743
Change in fair value of investment property
(net of deferred taxation) (38 995)
Change in fair value of property (49 122)
Deferred taxation 10 127
Impairment of goodwill 2 893
Headline profit (loss) attributable to linked unitholders 124 928 190 (14 359)
Change in fair value of financial instruments
(net of deferred taxation) 21 005
Change in fair value of financial instruments 14 807
Deferred taxation 6 198
Straight line rental income accrual
(net of deferred taxation) (17 209) (16 619)
Straight line rental income accrual (23 902) (23 082)
Deferred taxation 6 693 6 463
Pre-acquisition income recognised against
investment property 6 455
Restructuring expenses 10 000 20 000
Deferred taxation other adjustments 354 2 096 (874)
Transaction expenses 9 841 21 659
Impairment of other financial assets 2 196
Retained distributable earnings (1 176) (12 286) (395)
Distributable earnings attributable to
linked unitholders 116 738 39 068
Number of linked units in issue 359 083 615 N/A 164 935 365
Weighted average number of linked units in issue 307 268 720 N/A 53 773 448
Basic earnings per linked unit (cents) 40.66 N/A 40.43
Headline/diluted headline profit (loss)
per linked unit (cents) 40.66 N/A (26.70)
Distribution per linked unit (cents) 32.51 N/A 23.69
No calculation of diluted headline earnings per share has been performed as there are no convertible securities in issue.
Abridged consolidated statement of financial position
Unaudited Unaudited Audited
Six months Six months for year
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Assets
Non-current assets
Investment property 4 840 667 364 117 2 119 112
Fair value of property portfolio 4 767 706 364 117 2 070 053
Straight line rental income accrual 72 961 49 059
Property, plant and equipment 4 232 279
Other financial assets 67 069
4 844 899 431 186 2 119 391
Current assets
Other financial assets 26 392 34 105 25 917
Trade and other receivables 60 045 8 341 39 410
Cash and cash equivalents 76 918 30 859 56 828
163 355 73 305 122 155
Total assets 5 008 254 504 491 2 241 546
Equity and liabilities
Equity
Stated capital 2 261 901 932 232
Retained income 129 634 138 959 121 444
2 391 535 138 959 1 053 676
Liabilities
Non-current liabilities
Debentures 412 946 189 676
Secured financial liabilities 1 787 415 290 622 832 450
Other financial liabilities 7 009
Deferred tax 64 255 33 637 57 207
2 264 616 331 268 1 079 333
Current liabilities
Secured financial liabilities 197 978 33 992
Trade and other payables 36 959 4 908 35 477
Current tax payable 428 672
Derivative instruments 28 684
Unitholders for distribution 116 738 39 068
352 103 34 264 108 537
Total liabilities 2 616 719 365 532 1 187 870
Total equity and liabilities 5 008 254 504 491 2 241 546
Abridged condensed segmental analysis
For the six months ended 31 August Office Office
2013 (R'000) Retail government other Industrial Total
Contractual rental income 5 489 149 062 58 335 6 064 218 950
Straight line rental income accrual 344 19 266 3 196 1 096 23 902
Property operating expenses (1 061) (29 927) (19 220) (1 008) (51 216)
Net property rental and related income 4 772 138 401 42 311 6 152 191 636
Fair value adjustments
Investment property 102 397 3 310 382 1 202 304 225 584 4 840 667
Fair value of property portfolio 101 946 3 244 281 1 196 991 224 488 4 767 706
Straight line rental income accrual 451 66 101 5 313 1 096 72 961
Admin and
For the year ended Office Office corporate
28 February 2013 (R'000) Retail government other cost Total
Contractual rental income 2 683 83 978 30 206 116 867
Straight line rental income accrual 107 20 858 2 117 23 082
Property operating expenses (restated) (802) (15 344) (11 407) (27 553)
Net property rental and related income 1 988 89 492 20 916 112 396
Fair value adjustments (1 341) 52 928 (2 465) (14 807) 34 315
Investment property 48 000 1 470 037 601 075 2 119 112
Fair value of property portfolio 47 893 1 423 202 598 958 2 070 053
Straight line rental income accrual 107 46 835 2 117 49 059
Abridged consolidated statement of changes in equity
Retained Stated
Income capital Total
R'000 R'000 R'000
Balance at 28 February 2012 138 769 138 769
Total comprehensive profit for the period 190 190
Balance at 31 August 2012 138 959 138 959
Issue of linked units 952 501 952 501
Capital issue expenses (20 269) (20 269)
Total comprehensive loss for the period (17 515) (17 515)
Balance at 28 February 2013 121 444 932 232 1 053 676
Issue of 24 740 304 linked units effective 06 March 2013 179 368 179 368
Issue of 38 739 178 linked units effective 15 March 2013 280 859 280 859
Issue of 6 737 700 linked units effective 22 March 2013 48 848 48 848
Issue of 119 047 599 linked units effective 06 May 2013 863 095 863 095
Issue of 4 883 469 linked units effective 26 August 2013 35 185 35 185
Capital issue expenses (16 845) (16 845)
Prior period antecedent interest (44 837) (44 837)
Current period antecedent interest (16 004) (16 004)
Total comprehensive profit for the period 8 190 8 190
Balance at 31 August 2013 129 634 2 261 901 2 391 535
Abridged consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months for year
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Cash generated from operations 123 830 2 457 40 035
Interest received 2 558 2 357 3 217
Finance cost (52 586) (17 517) (50 664)
Taxation paid 457 (214)
Debenture interest paid (39 068)
Net cash from financing activities 34 734 (12 246) (7 626)
Acquisition of investment property (2 680 209) (1 591 052)
Refurbishment and renovations capitalised (17 444) (1 712) (45 830)
Acquisitions of property, plant and equipment (4 410)
Business combinations (7 011)
Movements in other financial assets (475) 14 917 49 486
Net cash from investing activities (2 702 538) 13 205 (1 594 407)
Proceeds from issue of linked units 1 630 625 1 121 908
Capital issue expenses (16 845)
Prior period antecedent interest paid (44 837)
Proceeds from secured financial liabilities 1 118 951 161 544 158
Payment of derivative instruments (36 944)
Net cash from financing activities 2 687 894 161 1 629 122
Net movement in cash and cash equivalents 20 090 1 120 27 089
Cash at the beginning of the year 56 828 29 739 29 739
Total cash at the end of the period 76 918 30 859 56 828
Commentary on results
Profile
Delta is a black managed property loan stock company that has been listed on the JSE Limited ("JSE") since
02 November 2012. Delta's primary business is long-term investment in quality, rental generating properties with a
strong focus on government and other empowerment sensitive tenants. Delta has the ability to purchase C-grade and
D-grade properties at favourable yields, convert them to A-grade or B-grade and thereafter secure long-term leases.
The portfolio currently comprises of 49 strategically located and high grade properties, valued at R4.8 billion.
Financial results
A direct comparison to the previous interim reporting period, being the results for the six months ended 31 August
2012 (prior to listing), is not as meaningful as a comparison to the forecast results as previously published by the
Fund on 08 April 2013.
Delta achieved distributable earnings of R116.7 million for the six months ended 31 August 2013. The accrued
distribution per linked unit of 32.51 cents is in line with the Fund's expectations and forecast. Delta remains on track
to meet its forecast distribution per linked unit for the full year ending 28 February 2014.
Finance income includes R16.0 million of antecedent interest relating to new linked units issued in the interim period.
Certain comparative figures have been reclassified. Property management fees have been reclassified from
administration expenses to property operating expenses. The effect of the reclassification is as follows:
Audited Restated
Year Year
ended Reclassification ended
28 February of property 28 February
2013 expenses 2013
R'000 R'000 R'000
Property operating expenses (21 947) (5 606) (27 553)
Administration expenses (17 399) 5 606 (11 793)
Property expenses have remained stable at 23.4% of contractual rental income as compared with 23.6% (restated)
at 28 February 2013.
Property portfolio
As at 31 August 2013, the portfolio, valued at R4.8 billion, consisted of 49 properties with a total GLA of 477 680 m(2).
Acquisitions
During the six months ended 31 August 2013 Delta completed the transfer of the following 29 properties valued at
R2.7 billion:
Weighted
average
Purchase rental
Tenancy Total price plus Effective per m2
(Multi/ GLA costs date of (excl parking
Property name Province Building sector Single) (m2) (R'000) acquisition and storage)
539 Church Street Gauteng Office government M 4 488 41 058 01/03/2013 90.38
Hensa Towers Limpopo Office government S 14 230 294 518 15/03/2013 160.68
Bestmed Building Gauteng Office government S 3 684 65 024 25/03/2013 102.83
Anchor House Free State Office government S 2 645 29 511 01/03/2013 87.42
Hallmark Building Gauteng Office government M 26 255 318 749 02/05/2013 102.20
Manaka Heights Gauteng Office government M 18 933 226 296 02/05/2013 115.20
Manaka House Gauteng Office government M 11 528 141 358 02/05/2013 99.16
Manaka Continental Gauteng Office government S 4 133 46 621 02/05/2013 90.78
Samora House KwaZulu-Natal Office government S 6 920 63 285 06/05/2013 94.79
Embassy House KwaZulu-Natal Office government M 32 365 239 280 23/05/2013 74.35
Du ToitSpan Northern Cape Office government M 9 204 100 558 01/05/2013 105.40
13 Elliot Street Northern Cape Office government S 4 400 45 429 01/05/2013 103.15
5/7 Elliot Street Northern Cape Office government S 2 300 28 559 01/05/2013 107.11
Thema Thumo Northern Cape Office government S 2 396 27 354 01/05/2013 102.83
Harlequins Office Park Gauteng Office government M 5 450 137 032 01/07/2013 161.03
12 New Street Gauteng Office other M 2 475 36 381 03/05/2013 114.67
14 New Street Gauteng Office other M 2 795 29 476 07/05/2013 87.83
Unisa House Gauteng Office other M 10 055 101 914 17/05/2013 91.92
Damelin Building KwaZulu-Natal Office other S 3 933 51 856 01/05/2013 98.81
Edcon Building Gauteng Office other S 6 188 51 361 03/07/2013 67.38
Eskom Sunninghill Gauteng Office other S 3 585 46 714 18/07/2013 93.00
SARS Bellville Western Cape Office other M 17 270 185 734 01/07/2013 85.70
SARS Randburg Gauteng Office other S 8 496 93 598 30/08/2013 74.20
CMH Building KwaZulu-Natal Retail S 10 974 54 053 27/05/2013 38.73
Protea Coin Cape Town Western Cape Industrial S 5 700 26 274 30/04/2013 39.54
Protea Coin Pretoria Gauteng Industrial M 7 140 31 393 07/05/2013 34.30
Protea Coin Durban KwaZulu-Natal Industrial S 4 365 21 292 15/05/2013 40.99
In 2 Fruit Building Gauteng Industrial S 11 177 64 095 10/05/2013 55.53
Top Trailers Gauteng Industrial S 28 363 81 436 25/07/2013 25.74
271 447 2 680 209
The weighted average rental per m2 per sector for the properties acquired are: office government R104.90; office
other R82.97; retail R60.91 and industrial R22.64. The lease expiry profile for the properties acquired shows 94%
(by rental) expiring beyond 28 February 2018.
The impact of delays in the transfer of certain properties was negated by savings achieved on borrowing costs through
both the delayed pay-out from the facilities and achieving more favourable rates.
Commitments
31 August
2013
R'000
Capital improvements in respect of investment property
Opening balance 01 March 2013 63 151
Refurbishments and renovations capitalised in the period (17 444)
New approvals 30 423
76 130
These commitments will be financed from available cash resources and new debt financing facilities.
Lease expiry profile
GLA Rental
Based on % %
Vacant 5.3
28 February 2014 5.3 5.9
28 February 2015 4.8 4.4
28 February 2016 4.2 6.5
28 February 2017 1.1 1.6
28 February 2018 0.1 0.1
> 28 February 2018 79.2 81.5
Total 100.0 100.0
During the period leases in respect of 39 533 m2 were renewed. The weighted average escalation rate across the
portfolio was 8.3% at 31 August 2013.
Vacancies
Vacancies in the Delta portfolio at 31 August 2013 amounted to 5.3% of gross lettable area compared with 4.4%
at 28 February 2013. The minor percentage increase from 28 February 2013 is due to the vacancy acquired at the
Embassy building which was not paid for and once tenanted will increase the forward yield of the Fund.
Borrowings
Delta's net borrowings of R1.9 billion equate to a gearing ratio of 41.0% compared with 40.9% at 28 February
2013. Gearing is calculated as total interest-bearing liabilities (excluding debentures) as a percentage of total income-
producing assets.
Interest rates in respect of 61.5% of borrowings at 31 August 2013 had been fixed for a weighted average period of
3.5 years. The average weighted interest rate of all borrowings was 7.5% per annum, with unutilised banking facilities
in excess of R200 million.
Delta has a R2 billion unsecured domestic medium term note programme and has a rating of BBB+ (long term) and
A2 (short term). A total of R190 million had been issued under the programme at 31 August 2013.
Current debt facilities:
Margin Rate
over below
JIBAR for Prime for
Utilised Fixed floating floating
Facility amount rate facility facility
R'million R'million Expiry % % %
Provider and type of loan
Nedbank Fixed 350 350 2018* 7.88
Nedbank Fixed 350 350 2016 7.74
Nedbank Floating 150 133 2016 2.05
Nedbank Fixed 270 270 2019 7.87
Nedbank Fixed 180 180 2017 7.55
Nedbank Floating 200 110 2017 1.88
Nedbank Floating 80 80 2018 1.96
Nedbank Floating 100 100 2018 1.96
Standard Bank Floating 130 128 2019 2.09
Standard Bank Floating 85 85 2017 1.91
Standard Bank Floating 93 2017 1.50
Commercial Paper Fixed 190 190 2014 7.55
2 178 1 976
* Fixed rate expires 2016.
At 31 August 2013, R9 million in interest had been accrued on the above facilities.
To ensure effective cash management, surplus cash is invested against revolving debt facilities.
Events after the reporting period
Subsequent to 31 August 2013, Delta took transfer of a further five properties at a cost of R548 million, taking the
total portfolio value to R5.3 billion. The weighted average rental per m2 of these acquisitions is R132.95.
Purchase
Total price plus Effective
GLA costs date of
Property name Province Building sector (m2) (R'000) acquisition
AZMO House Limpopo Office government 5 224 57 846 16/09/2013
CCMA Limpopo Office government 1 063 14 143 16/09/2013
Phomoko Towers Limpopo Office government 13 058 249 469 18/09/2013
Temo Towers Limpopo Office government 7 668 140 179 18/09/2013
Commission House Gauteng Office government 6 534 86 570 04/10/2013
33 547 548 207
Lease expiry profile of the post 31 August 2013 acquisitions
GLA Rental
Based on % %
Vacant 0.8
28 February 2014
28 February 2015
28 February 2016
28 February 2017 37.7 37.5
28 February 2018
28 February 2018 61.5 62.5
Total 100.0 100.0
Prospects
Due to its positioning, the portfolio has performed well over the past six months. The board expects similar
performance to ensue in the second half of the year and it is anticipated that the forecast year end distribution per
linked unit will be achieved. We will continue to focus on our strategy of growing the Fund with yield-enhancing assets
without compromising on quality. A key focus area of the executive management is to bed down all new acquisitions to
ensure the optimal performance of the portfolio.
In the interim reporting period Delta became a constituent of the FTSE-JSE SA listed property index which will continue
to create liquidity for the Fund. Delta's application for REIT status was approved by the JSE with effect from the
commencement of its next financial year, being 01 March 2014.
Delta's empowerment credentials position Delta well for the acquisition of future government tenanted buildings. Delta
has successfully renewed major government leases at prevailing rates in the interim period.
This prospects statement has not been reviewed or reported on by the Fund's independent external auditors.
Debenture interest distribution
Linked unitholders are advised that debenture interest distribution number 02 of 32.51 cents per linked unit for the
six months ended 31 August 2013 will be paid to linked unitholders in accordance with the abbreviated timetable
set out below:
Last day to trade cum distribution Friday, 15 November 2013
Linked units trade ex distribution Monday, 18 November 2013
Record date Friday, 22 November 2013
Payment date Monday, 25 November 2013
Linked unitholders may not dematerialise or rematerialise their linked units between Monday, 18 November 2013
and Friday, 22 November 2013, both days included.
Basis of preparation and accounting policies
The unaudited condensed consolidated interim results of Delta have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and contain the
information required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the requirements of
the South African Companies Act, 71 of 2008 (as amended). This report has been compiled under the supervision
of Bronwyn Corbett CA(SA), the Chief Financial Officer of Delta.
The accounting policies adopted in the preparation of these results are consistent with those applied in the preparation
of the financial statements for the year ended 28 February 2013. The results have not been reviewed or audited by
Delta's auditors, BDO South Africa Incorporated.
Delta has complied with IFRS and JSE Listings Requirements by disclosing earnings and headline earnings per share.
Headline earnings includes fair value adjustments for financial instruments and the straight line rental income accrual
which does not affect distributable earnings.
By order of the board
SH Nomvete (Chief Executive Officer) JB Magwaza (Chairman)
29 October 2013
Directors: JB Magwaza (Chairman), SH Nomvete* (CEO), BA Corbett* (CFO), JJG Da Costa^, N Khan^#,
IN Mkhari, KE Schmidt^, PD Simpson^
*Executive Non-Executive ^Independent Non-Executive #Lead Independent Director
Registered office: Silver Stream Office Park, 10 Muswell Road South, Bryanston
(PostNet Suite 210, Private Bag X21, Bryanston 2021)
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Nedbank Capital
www.deltafund.co.za
Date: 29/10/2013 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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