BEE property play, Delta lists on the JSE

Delta Property Fund debuted on the JSE on Friday with a promise to advance its black economic empowerment (BEE) origins.

Delta’s listing represent the maturing of a BEE commercial property player carved over the past 14 years under the steady hand of a team made of Sandile Nomvete, JP Magwaza, Ipeleng Mkhari , Bruce Zungu and Jabu Mriga. After establishing a successful property management outfit, Motseng Property Services, the team immersed itself into commercial property acquisition with a focus on the public sector as tenant. Thus to a large extent Delta was made out of the BEE initiatives of the department of public works which acts as the custodian of government’s property affairs.

Whilst the listing comes to dilute Delta’s 100% black ownership to about 20%, Delta’s CEO Nomvete said the group’s BEE impact was set to be advanced. This is because the listing gives Nomvete and his crowed management control over a larger property fund with much more superior growth prospects. The fund is to be managed by MPI, a 100% black owned entity featuring the original Delta investors.

Delta comes to join three other BEE styled property funds which debuted the JSE’s Real Estate Holdings and Development” sector in the past year or so. These are Rebosis Property Fund, Dipula Income Fund and Vunani Property Investment Fund.

Delta listed about 119.5 million linked units in what was described by the group as a significantly over-subscribed private placement, raising R980 million in pre-commitments from institutional investors and private client brokers. The first trade opened at R8.31 per linked unit, giving the Fund a market cap of R1.37 billion, based on its total number of linked units in issue.

The group led by Sandile Nomvete (CEO) said it offers access to a unique portfolio of government and South African Revenue Services (“SARS”)-tenanted buildings, providing secure income streams, large single tenant occupancy and subsequent low vacancies. Proceeds of the capital raising will be used to reduce the Fund’s overall gearing levels and fund a portion of the portfolio.

“We are very excited about our listing on the main board,” said Nomvete. This listing is the culmination of years of hard work and also marks the start of a new growth chapter for Delta Our vision is to grow the portfolio to approximately R7 billion by 2017 to ensure critical mass and liquidity.”

Delta’s portfolio boasts 20 well-established, mainly AAA, A or B grade high-quality office buildings across the country in nodes attractive to various government departments and SARS. The portfolio has been independently valued at R2.1 billion and comprises a total Gross Lettable Area (“GLA”) of 203 261 m2, consisting of 92% office space and an 8% retail component.

The Fund is externally managed by a 100% black-owned asset manager and said this qualifies it for long-term government leases in terms of the provisions of the Department of Public Works.

Indicative of the quality of Delta’s portfolio is the high level of pre-commitments received from key institutions such as Coronation Asset Management, Stanlib Asset Management, the Public Investment Corporation, Momentum Asset Management and Grindrod Asset Management.

“The response from the institutional market was humbling” said Nomvete. “Our growth potential is underscored by the fact that the placement was significantly over-subscribed. We deliberately included private client brokers in the placement to stimulate tradability and liquidity of the counter.”

Brad Maxwell, executive head of Investment Banking at Nedbank Capital said: “We are proud to have partnered with Delta Property Fund by acting as the book runner and corporate advisor to their successful listing on the JSE. This is a landmark listing for both Nedbank and the South African economy as it is one of the largest capital raisings on listing, in the property sector over the last decade. We look forward to collaborating further with Delta and seeing their business grow from strength to strength.”

Nedbank Corporate Property Finance managing executive, Frank Berkeley, said that the listing speaks to the expertise and level of collaboration that exists within the bank to the benefit of the client. “Nedbank Corporate Property Finance has provided a substantial percentage of the funding for the listing, which has been positively received by investors seeking a blue-chip investment in the JSE’s property sector. Our funding underscores our commitment to the listed property sector and reinforces our position as South Africa’s leading property financier.”

Nicky Newton-King, JSE CEO, said “The JSE is pleased to welcome Delta Property Fund to the Main Board. The growth of the number of companies in the real estate holdings and development sector has been impressive. This is the fifth company to list in the sector this year and last year there were six property-related listings. A quality portfolio such as that of Delta provides investors with even more choice.”

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