Delta Property Fund reported a mixed financial performance for the year to end-February as it focused on restructuring debt and optimising its portfolio in response to challenging market conditions.
The group’s net operating income increased by 10.3% to R721.4m, supported by stable rental income, cost containment measures and the disposal of noncore properties, the company said on Thursday.
However, the SA real estate investment trust, which focus on commercial office space primarily leased to government and state-owned enterprises, recorded a net loss of R104.2m, primarily driven by higher expected credit losses and increased taxation.
A key highlight was Delta’s proactive debt management and restructuring initiatives. The group renewed and extended debt facilities with leading financial institutions, including Nedbank, Standard Bank, Bank of China, State Bank of India and Investec.
These renewals, with ongoing negotiations to improve pricing and extend maturities, demonstrate Delta’s commitment to strengthening its financial position and ensuring a balanced debt maturity profile over the next two to three years, the company said.
Total interest-bearing debt was reduced slightly to R3.9bn, supported by capital repayments funded through property disposals and scheduled amortisation.
Property operating expenses decreased 12.8% to R422m. The company said the reduction was achieved through successful challenges to municipal property valuations, supplier changes, contract renegotiations and the disposal of noncore properties.
The portfolio’s vacancy rate decreased to 31.9% from 33.4%. The company disposed of six noncore properties valued at R154.9m during the year, with further disposals pending.
Delta renewed 79 leases for an average of 2.4 years and signed new leases for an average of 3.1 years. However, the average lease expiry period decreased to 14.7 months due to some leases becoming month-to-month agreements.
The amount owed to Delta by tenants increased to R155.2m, mainly due to delayed payments from government departments. To account for potential bad debts, the company set aside R61m, which is about 40% of the total amount owed. The company also recorded a R25.9m loss due to expected unpaid debts.
Despite these challenges, the company said its management remained confident in the recoverability of outstanding balances.
The company said its board conducted a thorough going-concern assessment and remained satisfied that the group could meet its cash obligations and continue operations, despite current liabilities exceeding current assets by R1.6bn.
No dividend was declared for the year, consistent with the prior period.
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