Delta Property Fund Limited (JSE:DLT) News - Voluntary pre-close operational update

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

VOLUNTARY PRE-CLOSE OPERATIONAL UPDATE

Shareholders are advised that the Company’s closed period with respect to the
financial year ending 28 February 2022, commences on 1 March 2022 and is
anticipated to conclude on or about 24 May 2022, with the publication of the
year-end results.

Stabilised leadership

Mr Siyabonga Mbanjwa started in his role as Delta’s new Chief Executive Officer
on 1 February 2022. He has already engaged extensively with the Board and the
management team. He has also completed site visits to the Company’s major assets
in Gauteng, the Western Cape and KwaZulu Natal. Ms Bongi Masinga, the former
interim CEO, continues to provide the necessary support to the CEO so that the
transition is as smooth as possible. Ms Masinga will therefore continue in her
role as Executive Director with specific strategic areas of focus, until further
notice.

Lease renewals

During the period under review, we have seen better traction with our largest
tenant, the Department of Public Works & Infrastructure (DPWI) on lease
renewals. We have continued to enjoy the benefit of our sovereign underpinned
portfolio that has shown resilience with government being one of the few tenants
in the sector being able to weather the Covid-19 storm. The continued focus on
month-on-month renewals is finally bearing fruit. DPWI month to month leases
with an aggregate gross letting area (GLA) of ±120 672m 2 have been renewed, in
principle. All major terms and conditions for these leases have been negotiated
and agreed. The leases are at final stages of being concluded. Lease terms for
the balance of the leases are currently awaiting signature by DPWI and are
expected to be finalised soon.

Additional leases with tenants with an average gross lettable area (GLA) of
43 715 m2 have also been concluded.

Rental recoveries

Management’s focus on rental arrear recoveries yielded positive results with
collections exceeding 100% in some months, resulting in reduction of arrears.

Disposals

Portfolio optimisation through disposals remains a key strategic focus for
Delta. Proceeds from disposals will be used to reduce debt and the concomitant
reduction of LTV. Negotiations are underway on the disposal of the Bloemfontein
and Kimberley portfolios. A separate announcement will be released on disposals
at an appropriate time.
Vacancies

Vacancies remain a challenge. The current economic conditions and the impact of
Covid-19 on tenants has not left us unscathed. The dial on the vacancy dashboard
has not gone the direction we had anticipated. Our strategy is to focus on
our key strategic nodes to ensure adequate tenancy and that assets where
appropriate tenants cannot be sourced are either repurposed or disposed.

Significant progress with CAPEX roll-out

The efforts of Delta's management team to rebuild trust with key tenants are
underpinned by the Company's ongoing delivery on its capital expenditure
programme. Capital expenditure commitments amounted to R165,9 million with
disbursements being approximately R100 million on over 70 assets. The management
team is on track on budgeted expenditure across all projects. Our capital
expenditure approach is defensive in nature and is unlikely to result in
portfolio value uplift.

Greening initiatives

As part of the capex rollout programme, Delta has replaced a significant amount
of mechanical equipment (such as HVAC and lifts) with energy efficient
equipment. All light fittings are also being changed to LED lighting. Management
is in the process of appointing service providers to assist in obtaining Energy
Performance Certificates for all its buildings in line with best practice and
legislative requirements. This will ensure that a benchmark for energy
efficiency for each building is set and plans to improve are then developed and
implemented.

Outlook

The office sector remains under pressure considering the impact of Covid-19 and
the move to a hybrid work model. Macro-economic headwinds are expected to
constrain the filling of vacancies as well as the disposal of assets. Management
and the Board will continue to apply a prudent approach to disposals, based on
the long-term holding costs of especially largely vacant assets instead of the
disposal of these assets at a discount to book value. Management is also in the
process of identifying assets with re-development and repurposing potential.
Notwithstanding challenges in the portfolio, ongoing engagement with key
tenants, supported by the increased delivery on capex commitments is expected
to have a positive impact on lease renewals.

The above pre-close operational update has not been reviewed or reported on by
the Company’s external auditors.


Johannesburg
28 February 2022

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


Investor Relations
Morne Reinders +27 (0)82 480 4541

Date: 28-02-2022 01:38:00
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