Delta International succesfully lists as first outright Africa property fund

Posted On Tuesday, 29 July 2014 09:31 Published by
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Delta International Property Holdings ("Delta International") (JSE short code: DLI) recently became the JSE's first property fund to offer property investors direct access to immediate high growth opportunities on the African continent. 

Louis Schnetler Incoming CEO of Delta International

The Company successfully listed a total of 43 918 556 new shares on the JSE AltX on 23 July 2014 at an issue price of US$2 per share, raising US$87 million by way of private placement.

"We are very excited about Delta International's prospects on the continent. The JSE listing provides a solid platform for growth," commented CEO designate, Louis Schnetler, who will take up the reins on 1 August 2014.

The listing will allow South African investors access to a dollar hedged investment without having to use their exchange control allowance.

"Delta International offers an attractive US dollar based forward yield of 7.8% and approximately 70% freefloat, which should support the stock's liquidity.

"Our portfolio is located in high-growth nodes in Casablanca, Morocco and in Maputo, Mozambique. Assets include a modern, dominant shopping mall and new office complexes, tenanted by blue chip multinationals under long-term leases, such as H&M, Marks & Spencer, Virgin Mega Store, British Petroleum, KPMG and Hollard Insurance," Schnetler added.

According to Schnetler, the assets are graded A to P-grade and are 92.68% tenanted, leaving some growth upside. The weighted average rental per m2 across the portfolio is US$28.50 at an average weighted escalation rate of 5.47% per annum. 66.1% of the lease profile (by rental income) expires beyond 2021.

"We have a dedicated team of asset managers based in-country and on the ground which I believe will add tremendous value to the portfolio.

"Our team includes first language speakers and we are comfortable with the cultural and business nuances in each country. The management team has collectively spent more than 20 years on the continent managing retail portfolios and developing property projects across 34 countries," Schnetler commented.

Property management will be undertaken by local experts such as CBRE in Morocco and Finlay in Mozambique.

Delta International's first phase of geographic expansion targets Morocco, Mozambique, Ghana and Nigeria. The second phase of expansion over the medium to longer term includes Angola, Gabon, Tanzania, Tunisia, Zambia and Zimbabwe.

"Our geographic spread will be across north and sub-Sahara Africa, excluding South Africa. We have identified an acquisition pipeline of up to US$250 000 000," commented Sandile Nomvete, Chairman of Delta International.

"Core to the portfolio will be office and dominant retail assets, but we will also consider strategically placed hotels, distribution centres and some residential acquisitions provided these are in rapidly urbanising areas and are underpinned by a sovereign lease," he added.

The Company does not assume any development or tenant risk and will generally only acquire assets with secured income streams.

"Before entering a country, we carefully analyse political and economic stability, expected GDP growth as well as the ease of doing business, especially the applicable tax regime and repatriation of dividends," Nomvete explains.

"Assets are considered for acquisition based on tenant quality, tenure and sustainability. The node in which the asset is located also plays an important role, as we only invest in high-growth nodes where we can achieve an appropriate yield," he concludes.

Following the private placement, Delta International is 25% held by JSE main board listed Delta Property Fund Limited (JSE short code: DLT). This holding is in line with Delta Property Fund's strategy of augmenting its portfolio of mainly government let strategic commercial offices with other high-growth investments which it does not have to manage.

Last modified on Tuesday, 29 July 2014 12:47

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