Delta posts 15.7% growth in FY distribution

Distribution grew 15.7% to 84.07 cents for the full-year ended February 2015, following the fund's change in capital structure and conversion to real estate investment trust (REIT) status during the year under review.

Delta CEO Sandile Nomvete said he was pleased with the results the company had achieved in a difficult trading environment.

"This is mainly as a result of our continued focus on the fundamentals such as managing lease renewals, vacancies, cost of debt growing the portfolio through yield enhancing acquisitions and refurbishments," Nomvete said.

"I'm also proud to say that we received our first distribution from our investment in Delta International during the year. This is in line with our objective of diversifying Delta's portfolio of government focused assets into other high-growth, specialist property sectors," he said.

For the year under review, net cost-to-income ratio declined marginally from 10.77% in the prior year to 10.16% for the reporting year.

Delta transferred R737.3 million of direct property acquisitions. These were acquired at an aggregate yield of 11.06%, adding 94,918m2 to the portfolio's overall gross lettable area.

Nomvete said that although some of these acquisitions increased the vacancy rate from 4.6% in the prior reporting year to 7.1%, these vacancies were not paid for.

"Given our ability to refurbish and upgrade assets in the right location to tenant specifications, we are confident that these vacancies will be filled, adding to Delta's forward yield," he said.

Post-year end, Delta successfully raised R735.1 million in an oversubscribed vendor placement. The proceeds were used to pay down existing debt facilities and to fund new acquisitions.

Nomvete said the South African property market found itself in a challenging position, with low economic growth and rising costs.

"Despite this, we are confident that our continued focus on fundamentals and the defensive nature of our portfolio combined with prudent debt management will position us to achieve our forward guidance distribution growth of 8% for 2016," he said.

Delta operates as a predominantly government-tenanted fund, with 59.3% of revenue being derived from the government office sector. The balance is split between other offices (32.5%), retail (5.9%) and industrial (2.3%).