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Announcement regarding the acquisition of letting enterprises and properties
Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT
ISIN: ZAE000172052
("Delta" or “the Company”)
REIT status approved
ANNOUNCEMENT REGARDING THE ACQUISITION OF LETTING ENTERPRISES AND PROPERTIES
1. Introduction
Delta shareholders are advised that Delta ('the Purchaser'), has entered into various agreements with
Orthotouch Limited (“the Vendor”) for the acquisition of 15 property letting enterprises (“the Acquisition”)
together with their related immovable properties (“the Properties”) as detailed in paragraph 4 below.
The effective date of the Acquisition is anticipated to be 1 August 2015.
2. Rationale for the Acquisition
The Acquisition is in line with Delta’s strategy of actively pursuing yield accretive investment opportunities
and leveraging its expertise as a sovereign underpinned REIT. Delta has historically upgraded lower grade
assets to achieve good yield compression. Delta has an existing portfolio of three smaller assets located in
the Bloemfontein central business node. The Acquisition provides an opportunity to further diversify
Delta’s geographic spread into Bloemfontein and offers redevelopment and letting opportunities which
may lead to further value extraction for Delta shareholders.
The property manager who will be responsible for the Properties has significant representation in the
regions in which the Properties are located. The Acquisition supports Delta’s strategy of bulking up in
regions where it has existing asset management and property management representation.
The majority of the Properties are leased on a month-to-month basis to predominantly national and
provincial government tenants at below market rentals and this has been confirmed through a due
diligence process. The board of directors of Delta (“the Directors”) are of the opinion that, following
refurbishments and upgrades to the assets, longer term leases at market related rates can be negotiated.
During the refurbishment of the properties Delta intends to make use of local contractors, sub-contractors
and labour in order to support local employment creation.
The Acquisition is yield accretive at 11.4% based on actual income and excludes any existing vacancies in
the Properties. Delta is of the opinion that it will be able to take advantage of this significant upside
potential by filling these vacancies at market related rates.
The Acquisition culminates two years of extensive negotiations, including financial and legal due
diligences, conducted by independent 3rd party advisers. During the legal due diligences the pending legal
action with the Vendor was identified. In order to mitigate the risk, it was decided that Section 34 notices
would be published and this process is currently underway.
3. Consideration for the Acquisition
The aggregate net purchase consideration for the Acquisition is R507 000 000 (five hundred and seven
million Rand) (the “Purchase Consideration”).
The Purchase Consideration excludes ancillary costs related to the Acquisition in the amount of R8 943 823
(eight million nine hundred and forty three thousand eight hundred and twenty three Rand) (“the
Acquisition Costs”).
No income has been attributed to vacant space in terms of determining the Purchase Consideration.
All capital expenditure requirements identified through the due diligence process have been negotiated
into the Purchase Consideration.
The Purchase Consideration will be settled through a combination of debt funding (vendor loan of
R202 800 000) and the issue of additional Delta shares to the vendor (R304 200 000).
4. Details of the Properties
Details of each Property, including inter alia the location, sector, weighted average rental per square
meter, the purchase prices as well as the valuations attributed to the Properties, are set out below.
Single or multi Weighted average Income including
Location Sector GLA m2 Purchase Consideration Value (2)
Property name tenanted rental per m2 (1) vacancies
22 & 24 George Lubbe Bloemfontein, Free
Str State Office, Government 6 250 Single 32.17 15 070 554 2 173 630 15 070 554
Bloemfontein, Free
Absa United State Office, Government 6 237 Multi 70.14 39 517 443 4 654 221 39 517 443
Bloemfontein, Free
African Life State Office, Government 8 452 Multi 77.94 51 909 242 7 428 949 51 909 242
Bloemfontein, Free
Classic Building State Office, Government 2 999 Multi 22.38 5 145 983 658 224 5 145 983
Bloemfontein, Free
CNA Building State Office, Government 2 489 Multi 78.92 17 537 987 2 103 875 17 537 987
Domitek Welkom, Free State Office, Government 1 710 Multi 48.80 11 903 315 887 108 11 903 315
Edgars Kroonstad Welkom, Free State Office, Government 5 903 Multi 56.43 27 235 661 3 361 823 27 235 661
Bloemfontein, Free
Fort Drury State Office, Government 10 476 Multi 108.76 102 712 664 13 019 776 102 712 664
Bloemfontein, Free
Katleho State Office, Government 5 911 Single 65.64 39 630 735 4 530 047 39 630 735
Bloemfontein, Free
Laboria House State Office, Government 3 954 Multi 66.10 15 288 397 2 608 919 15 288 397
Bloemfontein, Free
Nedbank Building State Office, Government 2 457 Multi 74.01 13 680 822 1 817 143 13 680 822
Bloemfontein, Free
SA Eagle State Office, Government 3 490 Multi 66.23 18 547 201 2 250 582 18 547 201
Sediba, Fountain VLU Bloemfontein, Free
Building State Office, Government 10 282 Multi 80.37 78 915 324 8 655 029 78 915 324
Standard Bank Nelspruit,
Nelspruit Mpumalanga Office, Government 4 537 Multi 85.61 34 782 050 3 453 095 34 782 050
Bloemfontein, Free
Trustfontein/Transtel State Office, Government 6 369 Multi 80.03 35 122 622 5 162 104 35 122 622
81 516 72.42 507 000 000 62 764 524 507 000 000
Notes:
1. Based on the net rental income, excluding parking and/or recoveries, for the 12 month period from the anticipated date of transfer.
2. No independent valuation has been performed on the Acquisition. The value attributed to the Acquisition of R507 000 000 (five hundred and seven million Rand) (“the Value”) was
derived at by Delta’s asset management company, MPI Property Asset Management Proprietary Limited.
5. Conditions precedent
The Acquisition is subject to, inter alia, the fulfilment or waiver of the following suspensive conditions:
5.1. written consent by the counter-parties to the lease agreements, relating to the Acquisition,
consenting to the assignment of all of the respective Vendor’s rights and obligations in terms of the
leases to Delta;
5.2. approval by the JSE Limited (“the JSE”) and Competition Commission, to the extent required; and
5.3. written confirmation from Delta confirming that Delta has the required funding available and/or
confirmation that Delta has arranged for sufficient equity on such terms and conditions as are
acceptable to the respective Vendor.
6. Unaudited pro forma financial effects of the Acquisition
The unaudited pro forma financial effects of the Acquisition on the net asset value and net tangible asset value
per Delta share have not been disclosed as they are not significant.
7. Forecast information on the Properties (“Forecasts”)
The Forecasts, including the assumptions on which they are based and the financial information from which
they are prepared, are the responsibility of the Directors. The Forecasts have not been reviewed or reported
on by the independent reporting accountants.
The Forecasts presented in the tables below have been prepared in accordance with Delta’s accounting
policies and in compliance with International Financial Reporting Standards.
Summarised Forecast in respect of the Acquisition:
For the 7 months For the 12 months
ended ended
29-Feb-16 28-Feb-17
Rental income 42 946 164 77 685 981
Straight-line rental income accrual 362 927 27 097
Total revenue 43 309 091 77 713 079
Net operating profit before finance charges 31 973 640 58 319 269
Net operating profit after finance charges 20 068 137 34 450 270
Net profit after tax 20 068 137 34 450 270
Distributable earnings attributable to shareholders 20 068 137 34 450 270
Notes:
1. The forecast information for the 7 months ending 28 February 2016 has been calculated from the anticipated
effective date of the Acquisition, 1 August 2015.
2. Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of the Acquisition
amounts to 71.6% for the seven months ending 29 February 2016 and 84.6% for the year ending 28 February 2017.
3. The income above does not take into account any income attributable to vacant space in the Forecasts.
4. Net operating profit after finance charges includes asset management fees, property management fees and
transaction costs.
5. Distributable income excludes any antecedent interest from the issue of new shares.
6. Finance charges have been assumed at an all-in rate of 8.75%.
8. Categorisation
The Acquisition is categorised as Category 2 transaction in terms of the JSE Limited Listings Requirements and
accordingly does not require approval by Delta shareholders.
2 June 2015
Investment bank and sponsor
Nedbank
Date: 02/06/2015 07:21:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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