Wrap Text
Provisional results for the group
Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT ISIN: ZAE000172052
("Delta" or "the Fund" or "the Group")
(REIT status approved)
REVIEWED PROVISIONAL RESULTS OF THE GROUP
for the year ended 28 February 2014
Highlights
Distribution of 72.69 cents
per linked unit ahead of
guidance of 72.50 cents
Property
portfolio value
of R7.0 billion
Market
capitalisation of
R3.4 billion
95.4%
occupancy
rate
Weighted average
base rentals
increased by 8.2%
Leases renewed
for 156 263 m2
(25.15% of portfolio)
Successful debt capital raise – R552.0 million
corporate bonds and commercial paper issued
during the year at an average rate of 6.68%
Reviewed provisional consolidated statement of comprehensive income
Reviewed Audited
for year ended for year ended
28 February 28 February
2014 2013
R'000 R'000
Revenue
Contractual rental income 594 209 116 867
Straight line rental income accrual 59 814 23 082
654 023 139 949
Property operating expenses (151 520) (27 553)
Net property rental and related income 502 503 112 396
Other income 12 300 10
Administration expenses (48 090) (11 793)
Net operating profit 466 713 100 613
Fair value adjustments 261 256 34 315
Profit from operations 727 969 134 928
Finance costs (151 149) (55 446)
Interest received 5 954 5 836
Antecedent interest 35 270 –
Listing expenses – (21 659)
Restructuring expenses – (20 000)
Profit before debenture interest and taxation 618 044 43 659
Debenture interest (289 316) (39 068)
Profit before taxation 328 728 4 591
Taxation 56 007 (21 916)
Profit (loss) for the year 384 735 (17 325)
Other comprehensive income – –
Total comprehensive profit (loss) for the year 384 735 (17 325)
Reconciliation of earnings, headline earnings and distributable
earnings
Total comprehensive profit (loss) for the year 384 735 (17 325)
Debenture interest 289 316 39 068
Earnings 674 051 21 743
Change in fair value of investment property
(net of deferred taxation) (308 748) (38 995)
Change in fair value of property (264 523) (49 122)
Deferred taxation (44 225) 10 127
Impairment of goodwill – 2 893
Headline earnings (loss) attributable to linked unitholders 365 303 (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) (73 321) (16 619)
Straight line rental income accrual (59 814) (23 082)
Deferred taxation (13 507) 6 463
Pre-acquisition income recognised against
investment property – 6 455
Restructuring expenses – 20 000
Listing Expenses – 21 659
Transaction costs – rights issue 1 048 –
Deferred taxation – other adjustments (4 046) (874)
Impairment of other financial assets – 2 196
Fair value loss on investments 3 267 –
Retained distributable earnings (2 935) (395)
Distributable earnings attributable to
linked unitholders 289 316 39 068
Less: Distribution declared 289 316 39 068
Interim 116 738 –
Final 172 578 39 068
Number of linked units in issue at interim 359 083 615
Number of linked units in issue at year end 429 510 825 164 935 365
Weighted average number of linked units in issue 344 639 642 53 773 448
Basic earnings per linked unit (cents) 195.58 40.43
Headline/diluted headline profit (loss) per linked unit (cents) 106.00 (26.70)
Distribution per linked unit (cents) – interim 32.51 –
Distribution per linked unit (cents) – year end 40.18 23.69
Distribution per linked unit (cents) – full year 72.69 23.69
The Fund has no dilutionary instruments in issue
Reviewed provisional consolidated statement of financial position
Reviewed Audited
for year ended for year ended
28 February 28 February
2014 2013
R'000 R'000
Assets
Non-current assets
Investment property 6 965 730 2 119 112
Fair value of property portfolio 6 853 449 2 070 053
Straight line rental income accrual 112 281 49 059
Property, plant and equipment 3 555 279
Investments 333 637 –
Deferred tax 4 573 –
7 307 495 2 119 391
Current assets
Other financial assets 26 862 25 917
Trade and other receivables 121 837 39 410
Cash and cash equivalents 82 179 56 828
230 878 122 155
Total assets 7 538 373 2 241 546
Equity and liabilities
Unitholders' interest
Stated capital 2 755 936 932 232
Retained income 506 179 121 444
Total equity 3 262 115 1 053 676
Debentures 493 937 189 676
Deferred consideration 55 825 –
Total unitholders' interest 3 811 877 1 243 352
Liabilities
Non-current liabilities
Interest-bearing borrowings 2 981 312 832 450
Deferred tax – 57 207
2 981 312 889 657
Current liabilities
Interest-bearing borrowings 216 430 33 992
Trade and other payables 83 256 35 477
Current tax payable 6 142 –
Unitholders for distribution 172 578 39 068
Amounts due to vendors 266 656 –
Bank overdraft 122 –
745 184 108 537
Total liabilities 3 726 496 998 194
Total equity and liabilities 7 538 373 2 241 546
Condensed Segmental Analysis Reviewed
Admin and
For the year ended Office Office corporate
28 February 2014 (R'000) Retail government other Industrial costs Total
Contractual rental income 14 574 396 662 162 640 20 333 – 594 209
Straight line rental income
accrual 811 46 135 8 120 4 748 – 59 814
Property operating expenses (3 157) (90 817) (54 384) (3 162) – (151 520)
Net property rental and
related income 12 228 351 980 116 376 21 919 – 502 503
Fair value adjustments 5 536 153 391 99 541 6 055 (3 267) 261 256
Investment property 5 536 153 391 99 541 6 055 – 264 523
Investments – – – – (3 267) (3 267)
Investments property 175 690 4 595 321 1 959 370 235 349 – 6 965 730
Fair value of
property portfolio 174 772 4 499 187 1 948 888 230 602 – 6 853 449
Straight line rental
income accrual 918 96 134 10 482 4 747 – 112 281
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 (1 341) 52 928 (2 465) – 49 122
Derivative instruments – – – (14 807) (14 807)
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
Reviewed provisional consolidated statement of changes in equity
Retained Stated
Income capital Total
R'000 R'000 R'000
Balance at 01 March 2012 138 769 – 138 769
Loss for the year (17 325) – (17 325)
Issue of 164 935 365 linked units effective 02 November 2012 – 952 501 952 501
Capital issue expenses – (20 269) (20 269)
Balance at 01 March 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
Issue of 3 526 140 linked units effective 13 September 2013 – 25 036 25 036
Issue of 931 359 linked units effective 13 September 2013 – 6 613 6 613
Issue of 2 721 124 linked units effective 01 October 2013 – 18 337 18 337
Issue of 25 853 907 linked units effective 09 December 2013 – 197 782 197 782
Issue of 8 214 677 linked units effective 19 December 2013 – 65 553 65 553
Issue of 4 238 127 linked units effective 23 December 2013 – 31 426 31 426
Issue of 952 103 linked units effective 13 February 2014 – 6 903 6 903
Issue of 3 919 367 linked units effective 13 February 2014 – 28 415 28 415
Issue of 20 070 406 linked units effective 28 February 2014 – 134 893 134 893
Capital issue expenses – (27 859) (27 859)
Antecedent interest accrued – distribution number 01* – (44 837) (44 837)
Antecedent interest accrued – distribution number 02 and 03* – (25 913) (25 913)
Profit for the year 384 735 – 384 735
Balance at 28 February 2014 506 179 2 755 936 3 262 115
* Details of distributions 01 to 03 as announced on SENS.
Reviewed provisional consolidated statement of cash flows
Reviewed Audited
for year ended for year ended
28 February 28 February
2014 2013
R'000 R'000
Cash generated from operations 377 872 40 035
Interest received 5 954 3 217
Finance costs (151 149) (50 664)
Taxation received/(paid) 370 (214)
Net cash from operating activities 233 047 (7 626)
Acquisition of investment property (4 477 778) (1 591 052)
Refurbishment and renovations capitalised (41 790) (45 830)
Purchase of property, plant and equipment (4 410) –
Business combinations – (7 011)
(Payments)/receipts from other financial assets (945) 49 486
Acquisition of listed securities (348 889) –
Accrued distribution on acquisition of listed securities 14 141 –
Net cash from investing activities (4 859 671) (1 594 407)
Proceeds from issue of linked units 2 226 574 1 121 908
Capital issue expenses (27 859) –
Debenture interest paid (200 643) –
Proceeds from interest-bearing borrowings 2 331 300 544 158
Payment on settlement of derivative instruments – (36 944)
Amounts due to vendors 266 656 –
Deferred consideration raised 55 825 –
Net cash from financing activities 4 651 853 1 629 122
Net movement in cash and cash equivalent 25 229 27 089
Cash at the beginning of the year 56 828 29 739
Total cash at end of the year 82 057 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 77 strategically located and high grade properties, valued at R7.0 billion.
Financial results
Delta has declared a distribution of 40.18 cents per linked unit for the six months ended 28 February 2014 which
is a 23.6% increase on the distribution for the six months ended 31 August 2013. A comparison to the year ended
28 February 2013 is not meaningful as the prior year results included the prelisted business which was significantly
restructured upon listing. The total distribution of 72.69 cents for the year is ahead of guidance provided to the market.
Distributable income includes R35.3 million of antecedent interest relating to new linked units issued during the year.
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 Reclassification Year
ended of property ended
28 February operating 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 operating expenses for the full year have marginally increased to 25.5% of contractual rental income as
compared with 23.4% at 31 August 2013 and 23.6% (restated) at 28 February 2013.
The increase in administration expenses from R15.8 million for the six months ended 31 August 2013 to R48.1 million
at 28 February 2014 is in line with the increase in the portfolio, taking into consideration that the majority of new
acquisitions in the interim period took place in the latter part of that period.
Property portfolio
As at 28 February 2014, the portfolio, valued at R7.0 billion, consisted of 77 properties with a total GLA of 621 442 m2.
The weighted average rental per m2 per sector for the full portfolio at year end was as follows:
Sector Weighted average rental per m2*
Office government R104.72
Office other R84.45
Retail R80.81
Industrial R28.78
* Weighted average rental at 28 February 2014.
The segmental and geographic breakdown of property holdings as at 28 February 2014 was as follows:
SEE PRESS FOR GRAPH
Acquisitions during the financial year
In line with Delta's strategy of growing the portfolio with single tenanted, quality and yield enhancing assets, R4.5 billion
worth of properties were acquired during the year under review.
The weighted average rental per m2 per sector for the properties acquired are:
Sector Weighted average rental per m2*
Office government R108.98
Office other R85.28
Retail R71.48
Industrial R28.78
* Weighted average rental as at 28 February 2014.
Equity investments
During the period under review Delta acquired a 9.07% interest in Ascension Properties Limited A units and a 21.94%
interest in Ascension Properties Limited B units:
Market value
Number of units Net cost 28 February 2014
28 February 2014 R'000 R'000
Ascension Properties Limited A linked units 28 001 628 116 221 131 328
Ascension Properties Limited B linked units 82 575 341 218 527 202 309
334 748 333 637
Commitments
28 February 2014
R'000
Capital improvements in respect of investment property
– Opening balance – 01 March 2013 63 151
– Refurbishments and renovations capitalised in the period (41 790)
– New approvals 161 324
182 685
These commitments will be financed from a combination of available cash resources and new debt financing facilities.
Lease expiry profile
GLA Rental
Based on % %
Vacant 4.6 0.0
28-Feb-15 17.0 17.6
29-Feb-16 12.0 12.5
28-Feb-17 20.1 22.9
28-Feb-18 14.2 13.9
28-Feb-19 10.7 13.1
> 28-Feb-19 21.4 20.0
Total 100.0 100.0
During the year leases in respect of 156 263 m2 (25.15% of portfolio) were renewed. The weighted average escalation
rate across the portfolio was 8.0% at 28 February 2014.
Vacancies
Vacancies in the Delta portfolio at 28 February 2014 increased marginally to 4.6% of gross lettable area compared
with 4.4% at 28 February 2013 due to the increased portfolio size.
Borrowings
Delta's borrowings of R3.5 billion, including amounts due to vendors, equate to a gearing ratio of 47.5% 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.
28 February 2014 28 February 2013
Investment property 6 965 730 2 119 112
Investment in listed securities 333 637 –
7 299 367 2 119 112
Total borrowings 3 464 398 866 442
Gearing 47.5% 40.9%
The growth of the portfolio in the year, as well as the acquisition of the Ascension Properties Limited A units and
Ascension Properties Limited B units, was partially funded through the increased gearing. Management has committed
to a 45% gearing in an aggressive acquisition period and so intends to reduce the current gearing of 47.5% post year
end. To mitigate the risk of higher interest rates management has, post year end, increased the level of fixed rate debt.
Management will continue to pursue attractive funding rates through both the debt capital markets and vanilla debt.
Interest rates in respect of 31.7% of borrowings at 28 February 2014 had been fixed for a weighted average period
of three years. Subsequent to year end Delta entered into contracts to fix a further R744.1 million of debt at between
three and five years at a weighted average all in rate of 9.47%, increasing the total fixed debt portion to 52.2%.
The weighted average interest rate of all borrowings was 7.5% per annum at 28 February 2014, with unutilised
banking facilities of R144.4 million.
During the year Delta issued R190 million in commercial paper and R362 million in secured notes under its unsecured
domestic medium term note programme.
Debt facilities at 28 February 2014:
Margin over Rate below
Utilised JIBAR for Prime for
Facility amount Fixed rate floating facility floating facility
Provider and type of loan R'million R'million Expiry % % %
Nedbank – Fixed 350 352 2018* 7.88
Nedbank – Fixed 350 352 2016 7.74
Nedbank – Floating 150 125 2016 2.05
Nedbank – Fixed 270 272 2019 7.87
Nedbank – Fixed 180 180 2017 7.55
Nedbank – Floating 200 180 2017 1.88
Nedbank – Floating 80 81 2019 1.96
Nedbank – Floating 100 102 2019 1.96
Nedbank – Floating 180 182 2018 1.85
Nedbank – Floating 32 32 2018 1.75
Nedbank – Floating 190 135 2019 1.96
Standard Bank – Floating 128 130 2019 2.09
Standard Bank – Floating 86 87 2017 1.91
Standard Bank – Floating 93 76 2017 1.50
Standard Bank – Floating 43 44 2017 1.85
Standard Bank – Floating 65 66 2019 2.00
Standard Bank – Floating 46 44 2017 1.50
Standard Bank – Floating 33 34 2019 2.10
Standard Bank – Floating 33 33 2018 2.00
Standard Bank – Floating 33 33 2017 1.90
Standard Bank – Floating 55 55 2017 1.90
Standard Bank – Floating 340 8 2015 1.34
Sanlam – Floating 13 13 2018 2.00
Sanlam – Floating 13 13 2019 2.10
Sanlam – Floating 13 13 2017 1.90
Commercial Paper – Floating 190 191 2015 0.45
Secured Notes – Floating 362 365 2017 1.50
3 628 3 198
* Fixed rate expires 2016.
At 28 February 2014, R19.2 million in interest had been accrued on the above facilities.
Amounts due to vendors at year end represented vendor loans which were settled in March 2014 from the surplus available on facilities
issued by Standard Bank.
To ensure effective cash management, surplus cash is invested against revolving debt facilities at a rate in excess of 7%.
Proposed merger
On 25 February 2014 an announcement was made on SENS that the boards of Delta, Rebosis Property Fund Limited and
Ascension Properties Limited (collectively, "the Parties") had concluded a written co-operation agreement in terms of which
each party undertakes to the other a duty of utmost good faith in co-operating to explore a tripartite merger of the Parties
("the Proposed Merger").
The rationale for the Proposed Merger includes, inter alia, the following:
- Capital available to smaller market capitalisation REITs is increasingly constrained, driving consolidation and corporate activity in
order to best serve the interests of the REITs linked unitholders and tenants;
- The values of the property portfolio and market capitalisation of the merged entity are anticipated to be in excess of R16.5 billion
and R9.5 billion, respectively, and accordingly the Proposed Merger will establish the largest listed black economic empowerment
property fund on the JSE Limited;
- The growth aspirations of each of the Parties will be fast tracked as strategic platforms are consolidated;
- The merged entity is expected to attract interest from a wider group of investors thereby increasing the liquidity of the merged
entity and may accordingly result in a re-rating of the merged entity; and
- The Proposed Merger is expected to position the merged entity to make further yield enhancing acquisitions and its increased size
should provide the merged entity with greater access to debt and capital markets at competitive rates and generally to have a
lower cost base, thereby improving the prospects of the merged entity.
The Parties are still going through the due diligence processes required by their respective boards.
Events after the reporting period
Subsequent to 28 February 2014, Delta entered into agreements with various vendors for the acquisition of the properties known as
Tembisa Megamart, Servamus, OMC Durban and the Marine for a total purchase consideration of R845.2 million. These acquisitions
will be financed through a combination of debt financing and new equity.
On 24 April 2014, Delta raised R118 million via a vendor consideration placement through the issue of 14 622 058 linked units at a
negotiated issue price of R8.07 per linked unit.
Prospects
Notwithstanding the Proposed Merger, management continues with its strategy to grow the portfolio with yield enhancing assets, its
international real estate strategy, while still optimising the existing portfolio. Delta continues to be well positioned for the acquisition
of future government, parastatal and BEE sensitive tenanted buildings, due to its empowerment credentials. This is evident in the
renewals of 25% of the leases in the existing portfolio.
The South African property market, especially in office space, is expected to remain challenging in 2014. However the Delta Board
believes that due to the portfolio's positioning, with the sovereign underpin and long lease expiry profile, it is largely shielded from many
of the expected challenges. Increasing operating costs remain a risk, specifically municipal expenses.
Delta anticipates double digit growth in the distribution per linked unit for the year ending 28 February 2015 should current economic
conditions prevail. This has been based on the Group's budgets for the year ended 28 February 2015, taking into account that the
majority of the Group's income is contractual rental income, as well as the fact that 52% of borrowings post year end have been fixed.
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.
This prospects statement has not been reviewed or reported on by Delta's independent external auditors.
Debenture interest distribution
Linked unitholders are advised that debenture interest distribution no. 03 of 40.18 cents per linked unit for the six months ended
28 February 2014 will be paid to linked unitholders in accordance with the abbreviated timetable set out below:
Last day to trade cum distribution Friday, 16 May 2014
Linked units trade ex distribution Monday, 19 May 2014
Record date Friday, 23 May 2014
Payment date Monday, 26 May 2014
Linked unitholders may not dematerialise or rematerialise their linked units between Monday, 19 May 2014 and Friday, 23 May 2014,
both days included.
Basis of preparation and accounting policies
The reviewed consolidated provisional 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 Financial Pronouncements as issued by the Financial Reporting
Standards Council 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. 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. BDO South Africa Incorporated has reviewed the financial information set out in
this report. Their unmodified review report is available for inspection at Delta's registered office.
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)
06 May 2014
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: 06/05/2014 05:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
