Nomvete helps take Delta to greater heights

Aug 05, 2014

There is no doubt that Delta Property Fund CEO Sandile Nomvete, who came to the listed property sector less than two years ago, is a savvy, shrewd and entrepreneurial player in the real estate industry, locally and on the continent.

Nomvete is not a novice when it comes to the property industry. With Ipeleng Mkhari, he founded Motseng Investment Holdings, a property management, facilities management and industrial investment firm in 1998.

He played a key role in developing the firm, which back then was among the very few black-owned property management companies from a small start-up into the major black economic empower-

ment (BEE) player it is today. In 2009 he co-founded Tuffsan 89 Investment Holdings, which later became Delta Property Fund, now listed on the JSE.

Nomvete has turned Delta, which is a black-managed real estate investment trust (Reit) into a level 2 BEE property charter rating. The company’s property portfolio comprises 77 properties that are geographically diversified across nine provinces in SA.

Its average value per property is R90.5m. About 56% of its portfolio benefits from a secure long-term sovereign underpin of commercial government leases including offices for the South African Revenue Service.

In less than two years Delta boasts R7bn worth of property assets thanks largely to Mr Nomvete’s unrelenting focus on growing its asset base and increasing management capacity for the firm’s expanding portfolio and smart debt management.

He is among the only three black people to head a listed property firm on the JSE, with Rebosis Property Fund CEO Sisa Ngebulana and Dipula Income Fund CEO Izak Petersen.

Earlier this year Nomvete and Ngebulana started talks to not only merge the two companies but also to buy Ascension Property Fund, in which they both own stakes. Rebosis’ portfolio is valued at R6.6bn. Delta owns assets valued at R7bn while Ascension’s portfolio of mostly government-tenanted offices is valued at about R4bn.

The proposed merger had been expected to bring value to the combined entity’s property portfolio and market capitalisation to more than R17bn and was expected to fast-track the growth aspirations of the parties.

But Nomvete pulled out of the potential merger probably seeing greater future potential in Delta in the rest of Africa.

Complicating the merger was that Ascension gave both Delta and Rebosis a chance to buy the firm. To avoid the complex mess that would follow‚ a triple merger was proposed.

However, after a due diligence investigation into the proposed tripartite merger, it was decided that the merger was not “currently opportune”.

 Nomvete decided to sell all Delta’s shares to Rebosis in a deal, which consisted of 28-million

Ascension A linked units and 82-million Ascension B linked units, for a price in cash of R4.76 per A unit and R2.61 per B unit.

While the merger between the three firms would have made business sense, the listed sector is still in dire need of more black players and the merger would have meant one black CEO of a listed property fund fewer on the JSE.

Nomvete is now focusing his attention on growing Delta beyond SA by using his entrepreneurial savvy to target the rest of the continent, which is experiencing huge economic and population growth but lacks real estate infrastructure.

Last week he listed Africa focused fund Delta International Property Holdings, of which he is chairman, on the JSE. This gives investors access to the dollar-based returns generated by shopping centres, offices, warehouses and hotels in countries such as Morocco, Mozambique, Kenya, Ghana and Nigeria.

The company listed a total of 43, 918,556 new shares on the JSE AltX on July 23 at an issue price of $2 a share, raising $87m by way of private placement.

The listing will allow South African investors access to a dollar-hedged investment without having to use their exchange control allowance. Delta International offers a US dollar-based forward yield of 7.8% and 70% free float, which is expected to support the stock’s liquidity.

The portfolio is located in high growth nodes in Casablanca, Morocco and in Maputo, Mozambique. Assets include a shopping mall and new office complexes, tenanted by blue-chip multinationals, such as H&M, Marks & Spencer, Virgin Mega Store, British Petroleum, KPMG and Hollard Insurance.

The assets are graded A to P and are 92.68% tenanted, leaving some growth upside.

The weighted average rental per square metre across the portfolio is $28.50 at an average weighted escalation rate of 5.47% an annum and 66.1% of the lease profile (by rental income) expires after 2021.

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-Saharan Africa, excluding SA. We have identified an acquisition pipeline of up to $250m,” Nomvete says. “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 says.

He has impressed analysts by delivering on his growth promises. When Delta was listed in November 2012, his prelisting target was to grow the mostly government-tenanted office portfolio from R2.1bn to R7bn within five years. That target was reached within 15 months.

The market will surely be keeping an eye on how Nomvete grows his African portfolio and asset managers will keep Delta International on their radar screens.

By Thabang Mokopanele

[email protected]

SA Property Insider