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DELTA PROPERTY FUND LIMITED - Market Update

Release Date: 13/05/2020 11:52
Code(s): DLT     PDF:  
 
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Market Update

Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT
ISIN: ZAE000194049
REIT status approved
(“Delta” or the “Fund” or the “Group” or the “Company”)

MARKET UPDATE

IMPACT OF COVID-19

The Group's strategy of being a sovereign focussed office fund has to
date limited the negative economic impact of COVID-19 on the business.
While rental collection for the period post financial year-end has
remained robust, it is still too early to quantify the full impact of
COVID-19, if any, on the portfolio.

Since the onset of the lockdown, we have collected 73.8% of the April
2020 billing, with a further 21.3% expected to be collected once
departments officially return to work. A component of our retail and
non-government tenants of 4.9% remain doubtful and we continue
engaging on an individual basis to understand how we may assist these
tenants to ensure sustainability of their businesses during these
uncertain times.

The Group received 50.2% of the May 2020 billing within the first week
of May, which is in line with historic payment patterns.

The portfolio remains defensive and resilient during these turbulent
times.

CAPITAL ALLOCATION

As reported on during the voluntary pre-close update published on SENS
on 2 March 2020 (“the voluntary pre-close update”) Delta is in the
process of concluding negotiations or has successfully renegotiated
approximately 80% of its bulk lease renewal programme.
Fundamental to these negotiations is the contractual commitment to
capital expenditure of approximately R200 million per annum over the
next three financial years (“the capex programme”).

With constrained headroom for borrowing and limited access to
alternative resources, funding for the capex programme to date has
been from working capital. In light of current market conditions and
uncertainty, management expects this trend to continue.

DISPOSAL PROGRAMME

Current market uncertainty has slowed the Group’s R1.3 billion
disposal programme, although negotiations announced during the
voluntary pre-lose update continue.

Previous forecasts included some level of proceeds from disposals to
supplement the capex programme and have subsequently been adjusted
downwards for the medium term.

FUNDING

Delta remains in constant communication with its primary funders, who
remain highly supportive and have continued to grant extensions on
expiring facilities during the period. The Fund continues to service
its capital and interest repayment obligations without any cashflow
restrictions.

Negotiations on facility renewals and normalising the Group’s cost of
funding on the back of a longer WALE is expected to be finalised on
conclusion of the remaining bulk leases.

EXTENSION OF FINANCIAL REPORTING PERIODS

Shareholders are referred to the market notice issued by the Financial
Services Conduct Authority on 3 April 2020, in respect of the extension
of financial reporting periods (the “Extension Periods”) and are
advised that the Group will be utilising the two-month Extension
Periods afforded to issuers with year-ends of 31 December 2019, 31
January 2020, 29 February 2020 and 31 March 2020.

The impact of COVID-19 lockdown has constrained the Group’s ability
to complete the necessary work required to finalise its financial
results and accordingly the Board considers it prudent and in the best
interests of the Group to utilise the Extension Periods.

Given that the Group’s financial year end is 29 February 2020, Delta
will issue its provisional annual financial statements on or about 15
June 2020 and its integrated annual report, incorporating the final
annual financial statements and the notice of annual general meeting,
by no later than 31 July 2020.

The results will be presented via webcast in light of the COVID-19
outbreak.

As advised by the JSE, the Group reiterates that market participants
should not draw undue adverse inferences as a result of Delta making
use of the Extension Periods available to it.

CONCLUSION

The impact of the Covid-19 pandemic remains fluid and the Company
continues its close contact with all relevant stakeholders to pro-
actively manage any contingencies. Liquidity remains of paramount
importance, especially considering Delta’s capex commitments, limited
capital raising opportunities and ongoing market uncertainty.

In light of the Group’s liquidity requirements the Board is currently
reviewing its distribution policy for the short-term. The Board and
management will continue to exercise prudence in managing the
Company’s liquidity.

The information on which this update is based has not been reviewed
or reported on by Delta’s auditors.

Johannesburg
13 May 2020

Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Investor Relations
Articulate Capital Partners
Morne Reinders - morne@articulatepartners.com

Date: 13-05-2020 11:52:00
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