CEO Ms Bongi Masinga commented: “Notwithstanding stagnant economic growth and a higher-for-longer interest rate environment, our consistent focus on cost optimisation, debt reduction, lease renewals and asset recycling continued to gain traction, with a much-improved performance against FY23 key metrics.

We have a clear flight path to reduced loan-to-value and an improved interest cover ratio, that will reposition Delta for growth and the recommencement of distributions.”

Profit from operations increased significantly from a loss of R226.1 million in the prior financial year to R399.2 million for the year under review.

As a result of the Group’s ongoing cost optimisation efforts, administrative expenses were reduced by 11.6% from R109.2 million to R96.5 million whilst property operating costs were materially unchanged at R483.9 million (FY23: R483.0 million) despite inflationary pressures.

The Group generated strong cash inflow from rental income and the successful collections of outstanding arrears. The cash generated for the year comprised income from operations of R658.9 million, interest income of R10.5 million, and proceeds from the disposal of properties of R13.5 million.

The cash was utilised to pay finance costs, taxation, net defensive capex, and net debt repayments. As a result of these efforts, SA REIT Funds from operations increased 68.5% to 18.7 cents per share from 11.1 cents in the prior financial year.

Mr Fikile Mhlontlo, Group CFO commented: “Finance costs remain the most significant line item on the statements of profit or loss and other comprehensive income and have increased from R457.9 million in FY23 to R484.2 million in the year under review, reflecting the current high interest rate environment.

“I am pleased to report that approximately R183.2 million was paid towards debts. This was funded by the disposal of properties to the amount of R73.5 million, with the balance of R109.7 million funded from cashflow and the Grit dividend income.”

During the financial year, Delta successfully renewed debt facilities with Nedbank, its largest funder, from a month-on-month basis to 7 April 2025. The Group also secured a revolving credit facility from Nedbank of R37. 5million.

Investec facilities were renewed for 24 months to 30 June 2025.

Notwithstanding a challenging market, Delta successfully disposed of Standard Bank Greyville, Nedbank Building, and Enterprise Park, for a combined amount of R88.4 million, of which R73.5 million was allocated to debt reduction.

The Group remains engaged with credible buyers on the disposal of its non-core property portfolio. Post year-end an additional six properties were disposed of for a gross amount of R144.9 million, with the proceeds also allocated to debt reduction.

Delta’s weighted average lease expiry (WALE) increased to 15.3 months (FY23: 13.2 months) on the back of 55 office leases with an aggregate gross lettable area (GLA) of 154 888m2 renewed for an average term of three years.  This excludes a further 14 DPWI leases renewed after year-end, two of which are for two years, and the balance for five years. New leases totalling 11 542 m2 of GLA were concluded with an average lease term of 3.4 years.

The Group reported a covenant loan-to-value of 59.4%, marginally down from 59.9% reported at the end of the 2023 financial year. The interest cover ratio, however, contracted slightly to 1.3 times cover (FY23: 1.4 times cover) as a result of higher interest charges during the financial year.

“Investors often ask what Delta will look like post the conclusion of our portfolio optimisation strategy.

“Over the medium term, we will evolve into a smaller, but much more sustainable REIT with core properties of around R4.5 billion and strong headroom for growth. Key ratios such as loan-to-value and interest cover will be well within covenant levels, at a projected ratio of between 40% and 50% and more 2 times cover respectively.

Important to note is the impact that disposals will have on vacancies, with the current core portfolio occupancy rate sitting at a relatively healthy over 90%. Net operating income from the core portfolio will amount to an estimated R600 million in today’s terms,” Ms Masinga added.

The Group has earmarked 43 non-core assets valued at R2. billion for disposal. Six properties valued at R144.9 million are expected to transfer this calendar year.

“It’s a common misperception in the market that we are forced sellers of our assets. This is evident from the number of opportunistic offers received or offers on assets that are not for sale.

“Most of the properties expected to transfer in the short term have all been disposed of at valuation or at premium.

“This speaks to the fair valuation of the portfolio, as much as it demonstrates our resolve to engage with serious buyers at market-related prices,” Ms Masinga said.

Delta’s SA REIT Funds from operations (“FFO”) per share increased by 68.5% to 18.7 cents from 11.1 cents in the prior financial year. Considering ongoing efforts to reduce debt, the board resolved not to declare a dividend for the year under review.