Africa-focused Delta International Property Fund (Delta International) says its growth ambitions on the continent are on track, after confirming its authority to issue 29 million shares in the market, if its board of directors want to. This follows the fund’s primary listing move from Bermuda to the Stock Exchange of Mauritius in March.
Delta International CEO Louis Schnetler says the company, which focuses on Morocco and Mozambique for opportunities, might issue the shares for future acquisitions.
“We have said in the past that we will come to the market for capital. We are just making sure that if we do come to the market for capital now that we are on a new exchange.
“If we ask for capital and shareholders come, it will show support for the story and support for the management team on its growth path,” says Schnetler.
Before its debut on the JSE’s AltX as the first specialist African real estate fund eight months ago, Delta International raised $87 million in a pre-listing private placement.
The company may look to place shares in the market to partly fund its recent acquisition of the Vodacom building in Maputo, Mozambique for $49 million (R579 million) – which is still to be transferred to the fund.
Although the rand-hedge counter initially announced a $250 million (R2.9 billion) acquisition pipeline before its local listing, it is now scaling back on its growth targets.
Management has found that its targets were “ambitious” as it realised the difficulties in bedding down lucrative deals on the continent. To respond to the difficulties, Delta International has a strategy of concluding deals in small increments.
“We will grow by buying two or three properties valued at $50 million [R590 million] or $70 million [R827 million] at a time, not go big with a massive big pipeline. I want to achieve slow and controlled growth,” Schnetler explains.
Also, the company encountered challenges in setting up debt facilities in the respective markets it has exposure to, which has disrupted its growth plans. Schnetler says banks outside of South Africa are opening up to fund its acquisitions.
Despite the initial challenges with its foray further north of the continent, Delta International seems settled into the markets it focuses on. Beyond the Vodacom building acquisition, it has also acquired the Hollard building in Maputo for $14 million (R165 million) funded through debt. The building is anchored by Hollard Insurance group, KPMG and British Petroleum.
Its asset in Morocco includes the 30 711 square metres Anfa Place Shopping Centre in Casablanca. Delta International is looking for more opportunities in the markets it has exposure to.
“We have paid our school fees and we have done the hard work and we are attracting a lot of attention in those two markets because of what we have done,” says Schnetler.
The focus for the company in terms of acquisitions will include opportunities in retail, given the growing middle class on the continent. It will also target multinational corporations, largely oil companies, looking to set up offices on the continent.
Some industry players like director at Meago Asset Managers Jay Padayachi, are cautious about African expansions. “I think that the opportunities in Africa do exist. However, it appears that African property opportunities are not as easy as initially thought. School fees are still being paid,” says Padayachi.
Delta International is in the process of migrating from the AltX to the JSE’s main board, which Schnetler says will give it exposure to bigger investors, as “some investors invest in companies on the main board and not on the AltX.”