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Delta Property plans R300m bond sale

DELTA Property Fund, the newly-listed black-owned listed property company, plans to sell as much as R300m of bonds before the end of the second quarter to help repay revolving credit facilities.

“We’re looking at raising R300m on the debt capital markets in the next three months,” Delta Property’s chief financial officer Bronwyn Corbett told Finweek in an interview in Johannesburg.

Delta, which is in the process of seeking a debt rating, currently has two revolving credit facilities with Nedbank Group [JSE:NED] and Standard Bank Group [JSE:SBK] that are worth R150m each.

Corbett said the average interest that Delta is paying on these facilities is 7.9% per annum. It would therefore make sense to pay off these facilities with debt raised in the bond market, where it believes it can raise capital at 6.7% payable over five years, she said.

Delta Property, which listed on November 2 2012 through a private placement of R980m worth of shares, has just raised an additional R1bn in capital via a rights issue that closed on May 3.

The company plans to use at least R800m of that capital to fund new acquisitions, taking the total value of planned purchases it has already announced to R2.3bn.

Excluding newly acquired assets whose transfer is pending regulatory approval, Delta’s portfolio consists of 20 properties across eight of South Africa’s nine provinces of which 76% is office space leased to national department of public works while an additional 22% comprises office space largely leased to the SA Revenue Service.

The remaining 2% of the portfolio is retail space.

The annual escalation of Delta’s rental rates is 8.4% while occupancy rates are at 95.6%.

Delta’s chief executive officer Sandile Nomvete said that while the company “likes the sovereign underpin” of its government tenants it does plan to diversify its property portfolio over time, particularly in the rural retail and community centre space.

“We have a forward yield of about 9.2% and we don’t want to dilute that,” said Nomvete.

“While we certainly deem it prudent to diversify, we won’t look at any acquisitions that are yield dilutionary.”

The company plans to unveil a Pan-African expansion strategy in the next two to three years, Nomvete added.

On Monday Delta announced its maiden results for the year ended February 28 2012, with distributable earnings for the period reaching R39.068m against a pre-listing forecast of R39.050m.

Distribution per linked unit of 23.69 cents for the four months since listing was declared, in line with the fund’s pre-listing forecast of 23.68c.

 - Finweek

For more go to finweek.com or follow Finweek on Twitter.

 
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