Good morning, ladies and gentlemen. Welcome to Delta Property Fund's interim results for the six-month period ended August 31st, 2021. Before I hand over to Ms. Bongi Masinga, the Interim CEO, just a couple of housekeeping rules. We are experiencing load shedding at the moment in Johannesburg. We expect power to get back on at about 10:30 A.M., which may result in the lights dimming or worst case scenario, the system kicking off before it reboots. Please stay on the line with us. We will reboot as soon as possible, and we will put up an interlude slide if this happens. We do not expect any issues, though. We will also have the recording up of the presentation available later on today on deltafund.co.za. I would like to hand over to Ms. Bongi Masinga to start with proceedings. Thank you.
Good morning, everyone. Can anyone hear me? Can everyone hear me? Good morning, everyone, and thank you very much for attending our interim results presentation. We are always very excited to still have interest on our stock and we're hoping as well you'll be excited with what we are about to present today. For the duration of the presentation, I would like to remove my mask so you can all hear me. We will start now with our first slide on. To just hit on with some of the highlights of our results. The value of investment property is at ZAR 8.3 billion, having at the end of February full year end 2021 at ZAR 8.2 billion, and that marginal movement is as a result of the CapEx spend into our properties.
Our gross lettable area is 904,528 sq m, and that reduction, slight reduction is as a result of the sale of Domus, which was 5,454 sq m. We've gone through and have agreed on a strategy, and the outcome of that strategy is we are still committed to remain very much sovereign underpinned and a JSE listed SA REIT. Our NAV is at ZAR 5.23, which is an excellent improvement as a result of the profit from our February end 2021 at ZAR 5.06. Now, one thing that we did, and, you know, the results speak for themselves when you look at the collections at 93.3%, is have a really focused effort with our team in terms of collections.
That amount is not 100%, and though we do strive to collect 100% per month, it's not really possible. What really keeps us awake at night are the legacy arrear issues which have been escalated to my office and Marelise's office, and we are handling those, and we are starting to see traction, but especially communication and change of correspondence between the parties. I end with the share price. Though we're not remunerated based on the share price, but we are very, very excited that we are seeing some positive traction. We closed on Friday at ZAR 0.62 per share, and today we've seen even better trading on the platform. You know, so since our resumption of trade in July this year, I think, the share has done exceptionally well. Apologies, everyone, for that.
It was us just getting back from being load shedding. I will start again the slide on the roadmap to distribution payment. Our strategic objective is to strengthen the balance sheet and improve LTV to below 50% and reduce vacancy to below industry norms by February 2024. We are targeting 100,000 sq m of leases to be signed by February 2022. Having said that, we fully understand that it is not 100% within our control, but we are a bit excited. We have started negotiations with the department and I think we have a better understanding as well of where they intend to go with some of their departments. We do accept that at some point we may not win.
I mean, at the moment, we are heavily weighted on sovereign, and we understand that they will not renew all our leases at this point, but we are targeting at least 50% of what we have for sovereign to be renewed. Our other strategic objective is portfolio optimization, resizing, and de-diversifying of the portfolio in terms of size, quantity, quality, location, and tenant base. We are, as part of that, looking at disposals, and you'd have seen in the SENS we have also announced latest disposal of about three buildings, and I can assure you there's still more to come.
We are, at the moment, also very open and are having discussions with some conversion specialists. I'm not saying we will be going into housing, but seeing how, as part of portfolio optimization, we can participate in that space with a clear exit, for us. Of course, the sectors are continuously being discussed and being looked at as part of that portfolio optimization. We are looking to improve our debt terms. As you know, we've been on month-on-month, not month-on-month, very short dated terms with our funders, and we're very proud to say that with Standard Bank, we have now concluded a three-year term for that funding and we are still engaging with Nedbank, and we're hoping for something a bit more conclusive and longer-dated by the end of November. Our performance culture has improved.
Some of the numbers that you're seeing coming through are as a result of the team working together and what we have done as well is we are all 100% back at the office, still adhering to the COVID-19 protocols. What we have achieved thus far, we have a Board-approved strategy. We have our new mission and vision, and the staff is being taken through what our new values, which we are very insistent that everyone at least adheres to all of them, or four of them. We can categorically say that we now have stabilized leadership. The appointment of the new CEO is imminent, and hopefully before the end of this week, we will be able to go on ourselves to announce who the new permanent CEO will be. We continue to enforce governance and have oversight on roles.
We have streamlined procurement procedures, which were some of the issues that came up as part of the internal control Mazars report, and we are even looking at automation of the processes. We have said this in the past, and we continue to be very proud that we have bolstered key management and heads of divisions, and their competencies with ongoing skills transfer and development. The team in operational efficiencies and effectiveness, part of that is that the team does not work in silos. There is horizontal integration, and we have successfully completed the removal of some of, what do I call it, bureaucratic structures that did exist in the business.
Our KPIs still continue to be to conclude new leases and reduce vacancies, and I suppose at this point I can pause and say we have not done well on this front, and it will become a very focused area for end of February 2022. I suppose when Marelise and I sat back and looked at what this business needed, first part was leadership, which I think we've gotten right. Heads of division, structure, which we have gotten right. Collections, 'cause without cash flows there isn't much that we can actually do and conclude. Also, CapEx delivery, which we have done quite well and continue to drive that, understanding that we're still playing catch up. So, the reduction of vacancies, I've got to say, did take a bit of a back seat and now has become a focus area for us to do.
It will be handled in the same manner in which we handled and tackled collections, with the exception, of course, this time that we will use external parties to help us filling these vacancies. We've spoken about ongoing CapEx delivery. Arrears and collection is still our focus, and we are achieving that. If you see the number of collections of 93% per month, some months we do better. We can collect as much as 145%, and part of that is we are starting to deal with the arrears. Disposals is one of our achievements as well and will continue to be. Extension of debt, I've already said, and human capital, we do have a vigorous team.
We do have a team that understands that if they do need some training, we are there to support and facilitate that to ensure that they do deliver and actually perform effectively in what they do. Our strategic focus areas continue to be our LTV target. We are looking at less than 50% by August 2022, and less than 45% by February 2023, the next financial year. ICR target, 2 x by February 2022 and 2.5 x by 2023. We are slightly below our ICR target, but marginally. We're sitting at this moment at 1.9 x. Our CapEx execution, the outcomes, we're hoping that it facilitates with reduction in vacancies, tenant retention, and most importantly OSH compliance.
We report to the Board on our OHS compliance, and we are making fantastic strides in achieving compliance in all our firstly tenanted buildings, and then, of course, the rest of our portfolio buildings, especially in buildings that we know we will not dispose of. We are committed to the CapEx of ZAR 183 million. I've spoken a bit about human capital development, which is ongoing. We now have finally an engaged team with aligned values. We are also looking to do an employee climate survey and an ethics questionnaire before the end of 2022, and we shall be reporting for year-end where we think the mood is, where we still need areas of improvement and focus. Performance contracts will be undertaken for the financial year-end 2023.
I've already said that staff is encouraged to improve in skills and go to training and development. One of the things that we have found is some of the human capital issues is we do have an under-capacitated HR division, and we are looking to capacitate that, bring in skills, understand what we would like to achieve in terms of HR, so we can relieve a bit of pressure from Marelise and I in dealing with human capital issues and also in terms of the heads of the divisions, and they continue to focus on the right issues. Business update. We have signed 9,109 sq m of new leases with a further 34,229 renewed despite tough market conditions.
Rental reversions are in line with expected market rentals, and we are continuing with this trajectory, which will extend our portfolio weighted average lease expiring. Our capital expenditure, which is one of our key KPIs. The delivery of the CapEx program remains a priority to ensure assets meet tenants' requirements. During the reported period, capital expenditure on investment property totaled ZAR 52 million. It may seem small after our reporting period. In October, it sat at ZAR 74.5 million. A lot of that will come through as we have to pay progress payments on our lifts.
The lifts project is already underway, and we are hoping really to have concluded by the end, a lot of them, by the end of financial year-end, understanding that some of the delays are not really from our end, but it has to do with delivery and procurement from their end. These projects are funded mainly from operational cashflow with the upgrade at Poyntons being funded by debt facilities. More projects completed or underway, and I will take them through. I think it's better if I take them through one- by- one. I have a list on the slide which you currently see, and I will take them through one- by- one and just to show and to demonstrate how proud we are of what we've done.
We're showing you the before and after, and we will start with Poyntons, and what you're seeing now is the lift upgrade. When I go through what needs to be done, we have about six pictures or slides to show you of Poyntons. I will just read through, and they will just show you the pictures. The upgrade of the fire system is 90% complete, with all the floors replaced. If you remember, ladies and gentlemen, Poyntons is probably our largest building in our portfolio, with 74,000 sq m and 34 floors. All fire signage has been replaced, additional fire equipment installed, and the installation of smoke extraction and detection systems.
Currently, there are two lifts on the west block, four lifts in the east block, and two lifts in the block occupied by the Department of Defence, which are being replaced. The commissioning of these lifts will commence as well from February 2022 to May 2022. Now, Poyntons on its own has got 19 lifts and three emergency firemen's lifts. The facade level street has been painted. Steel balustrade ceiling on walkways and entrances have been repaired and repainted. What you saw, we started with the reception upgrade, which is currently underway, with three reception areas being retiled, walls cladded, ceiling replaced and painted, and the shop fronts are being refurbished. The total spend for the operating period was ZAR 11 million. Now we move to our second building, which is Commissioner House.
Commissioner House houses the police and the Hawks in Cape Town, Bellville. Now, I mean, the interesting thing about this building, when Marelise and I went to see it last year, we found that part of the building inside was burnt and has been lying like that for the last two years. We are proud now to say that the upgrade which has been completed included the replacement of all common area carpets with vinyl flooring, which is what you are seeing now. Replacement of all damaged dry walling, ceilings, carpeting, blinds, and HVAC systems. The paintings of the internal office walls and the repainting of the facade. The total spent for this period was ZAR 909 million. We move on to Veritas. Veritas houses the police in Pretoria.
The upgrade included the replacement of all air conditioning systems in the building, rewiring of all non-compliant electrical wiring and connections and equipment, the replacement of the front entrance doors, the installation of a disability access ramp, and the repairing and replacement of all faulty plumbing services and equipment in kitchens and toilets. I think it's important for me to state that as we do upgrades of HVACs and we do some rewiring of electrical wiring, we also then go and do electrical compliance. You will find that a lot of our buildings now have a compliance certificate in terms of electrification. The lift upgrade is currently underway and in progress and expected to be commissioned in January 2022. The total spend for this building in this period is ZAR 6.3 million.
We move to 56 Barrack. In Cape Town, 56 Barrack Street. This building houses the Department of Home Affairs. Now, if you just look at the before and after of the kitchen, it is. You know, for us, as landlords, really, we were not paying attention. When we talk about tenant experience, clearly, they were not enjoying that. The work post-period end included the upgrade of all kitchen facilities in the buildings with new floor and wall tiles, new ceilings and lights, new kitchen cabinets, new sinks, taps, and new hydro boil units. The blind, the blinds have also been replaced together with the replacement of customer care area flooring with new vinyl, and that's where the department, actually meets the outside for all, registrations. The first floor further had toilet facility upgrades with new wall and floor tile ceilings, vanities, basins and taps replacement.
The leaking roof has been repaired and waterproofing replaced. Now, this is some of the work that we do, ladies and gentlemen, as well for tenant retention. If I can move to Servamus. Servamus in Durban suffered a fire earlier this year, and as part of fixing that first floor, we have temporarily relocated the police and moved them into one of our other space in Durban. The upgrades included the replacement of the main chiller unit. The fire that damaged on the first floor will be completed shortly, we're looking before the calendar year. The total spent, and we will continue as well to do the rest of the floors at Servamus. The total spend for the reporting period was ZAR 2.3 million. Now I will deal with a few buildings at the same time. Isivuno, Dimient, 88 Field Street, and 2 Devonshire.
88 Field Street. Well, let me start with Dimient. In fact, I will start with Isivuno. Sorry. Isivuno is our building in Pretoria, which houses the Tshwane Municipality, more their business chamber. The upgrade included the replacement of all leaking waterproofing on the main floor, first floor overhang and the ground floor, the fountain area, major repairs of the two existing chillers, cooling towers and pump systems. The lift upgrade is planned for the six lifts, with additional fireman's lift at the cost of ZAR 10.3 million. The total spend for the reported period was just under ZAR 1 million. Then I move on to Dimient, which is in Kimberley.
The upgrade included the replacement of all common area carpets with vinyl flooring, the replacement of all carpets with new carpets, the replacement of all office and boardroom blinds, and the replacement of a split air con unit. ZAR 4 million. 88 Field Street, which is our building in Durban, which was affected by the looting in July. The upgrade included the resealing of glass facade and replacement of cracked glass, panes on two sides of the building, replacement of main chiller unit, and the painting of offices and common areas. Now, if you look at the structure of that building, you do need an experienced team to go in, 'cause it does require a bit of suspension. What we actually spent, a bulk of that 12.4 million was to seal the exterior windows, which had started to leak and they were cracked.
Devonshire in Durban houses the Department of Justice. The upgrade included the replacement of the main chiller unit, the air cons, the control units, cooling tower, and water pumps. The total spend for the reported period was ZAR 3.9 million. We move on to the next slide, where we have SARS Kimberley and WB Centre in Kimberley. The upgrade SARS Kimberley actually got a new total facelift. We'd signed a new lease with SARS. The upgrade included the replacement and repair of the entire roof. All air conditioning and facade cracks were repaired for a total spend of ZAR 3.2 million. WB Centre in Kimberley, the upgrade included the installation of water tanks, replacement and repair of all waterproofing, painting of the buildings inside and out, and the replacement of blinds for a total amount of ZAR 1.9 million.
Some of the stuff that we have done, which is not here, a lot of our areas where there are water problems and water shortages, like Pietermaritzburg and Kimberley, a lot of our buildings are supported by water tanks, which we have included. Sorry, I'm flipping through a few documents here. My apologies. Our disposal strategy we've spoken about, which has gotten approval from the Board and there are a lot more buildings to come. The three that we have gone out on since is Delta House, which was sold for ZAR 74 million. Fort Drury for ZAR 60 million. Fort Drury's in Bloemfontein and Sediba. Fort Drury and Sediba went out on sale this morning for ZAR 76 and a half million. We're looking as well shortly to be announcing probably on another two more buildings. Thank you very much.
My report will end here, and I will hand over to Marelise, the CFO.
Thank you, Bongi. Good morning, everybody, and thank you for taking the time to listen to our presentation this morning. I would like to jump right into our financial performance for 2021. Our loan to value increased marginally to 55.7% from the February 2021 numbers of 56.5%. Our average cost of debt increased quite significantly to 7.1% from August last year being at 8.2%. Our SA REIT funds from operations, which was previously the distributable earnings, that is at ZAR 177.5 million compared to August 2020 at ZAR 116.4 million. Our interest cover ratio at this point in time is 2.1, and February last year was 1.9.
I think just interesting to note there, because our interest cover ratio does go up and down as we progress during the period and is also normally quite sensitive when it comes to, you know, cash that we spend as well. If we move on to our next slide, the financial overview. Our rental income, including our recoveries, have been pretty much flat from ZAR 72.3 million-ZAR 72.46 million. Our net operating income is at ZAR 49 million versus the ZAR 42.4 million of the previous period. I think the one thing to note here is our cost to income ratio on a gross basis as well as the net basis is currently at 45% and 34.2%. It is marginally lower than what we had in August 2020.
It is still high, and we do acknowledge that it is high. It will certainly, with our focus on filling vacancies, that ratio will certainly come down automatically because currently we do still have the cost side of the building. However, the income is low for certain buildings. My investment property went from August 2020 of ZAR 8.7 billion. In February 2021, we had ZAR 8.2 billion, and we're now at ZAR 8.25 billion. It's mainly due to the CapEx spend that we're gonna find from the one period to the next. Our investment in listed security is our investment in Grit. That has been reducing over the last period from ZAR 189 million in August. In February, we had ZAR 157 million, ZAR 116 million at the moment.
The reason for our decrease here, specifically, I think COVID has hit Grit quite hard. As a result, we would have seen that downward trajectory in terms of their share price as well as what the fluctuations in currency is doing to them as our shares are held on the same. I think also just noteworthy is the sale of shares that happened in the prior period. Our borrowings is ZAR 4.9 billion, came down to ZAR 4.6 billion. It's mainly due to our amortization that we find on our facilities. I think also the disposal that we had on Domus. It is a small amount that we repaid on that instance, it was ZAR 25 million.
However, I think every bit helps in terms of getting our borrowings down. As Bongi mentioned earlier, our borrowings are still pretty much short term, and we are working quite hard on getting it extended to a longer term period. I think it's just worthy to note that these things do not happen overnight. It is taking us time to get there, and we're certainly working quite hard on getting our numbers down to the level that we would like to get it to. Our loan to value, as I mentioned, went from 54.1% - 56.5% and then to 55.7%, where we are today. Weighted average interest rate coming down from 8.2% in August last year to 7.1% now.
We still have 40% of our portfolio being fixed at approximately 7% or 6.95%. That unfortunately is quite out of kilter where the current JIBAR rate is at the moment. But that is still in place for the next two years until 2024. Our SA REIT net asset value per share went from ZAR 5.62 in August to ZAR 5.56 in February 2021, apologies, to August 2021, where we are ZAR 5.23. The movement for that is as a result of from August to February, was the downward valuation of properties. From February to August now is the profit increase that we found there. Moving to our next slide, our statement of profit and loss and other comprehensive income.
We have touched on our rental income as well as our property expense line. I think it's just interesting to note then that the dividend income decreased quite significant from ZAR 13 million - ZAR 3 million, as a result of the distributions from Grit's side. Grit also did declare from their side that they will not be distributing a dividend for this period, so we will not be expecting a dividend for the end of this financial year. We do have our loss and gain on the foreign exchange movements came down quite significantly to ZAR 3 million, and it is the foreign exchange movements that we do find on the Grit shares. Previously, we
It was not just the fair value adjustments on or the currency fluctuations on the Grit shares, but also the fair value movement in terms of the Bank of China facility was in that number as well. We have in the meantime fixed that Bank of China facility as a rand-denominated loan, which means that that fluctuation will go away. Our admin expenses moved from ZAR 54.9 million- ZAR 53.9 million. In essence, it's a ZAR 1 million move. However, it's kind of off, partly offset to one another. The one is an increase in our professional fees, whereas the other side of that was a decrease in executive director fees.
When we get to our fair value adjustment movements of ZAR 24.5 million, that is mainly due to our derivatives that we have for the last period from February to where we are now, compared to the ZAR 172 million that we had in August. The reason for the two differences is that in August 2020, there was a far greater portion of that that was actually fair value adjustments of the properties. Our ECL provisions moved ZAR 8.9 million. It's made up of two components there. There's a guarantee to Grit as well as our intercompany loans. So ECLs take care of both of those, and there was ZAR 8.9 million for this period. The majority of that relate to the intercompany loan side of it. Our finance cost, as we spoke earlier, came down quite significantly.
As we said, the average interest rate is 7.2% compared to 8.1% of the prior period. I think the same goes for our taxation side of it. In the prior financial period, there was no provision allowed in terms of provisions for bad debts from a tax perspective, whereas in this period, the provisions are again allowed from a tax perspective. If we go to our next slide, we talk about the SA REIT funds from operations. We start with our profit for the period, which is ZAR 147.9 million. When we look at the adjustments that we take into consideration, it's mainly getting rid of the non-cash items in the income statement, getting us down to our distributable earnings available for distribution, being ZAR 177 million. In fact, it goes up as opposed to down.
We did not have a change in any of our shares for the period from August 2020 to February, and then August this year again. We own 714 million shares in issue, giving us a distribution per share of ZAR 0.2486, which is much higher than what we found in August 2020. You will also, if I can just conclude on that slide, to say that the Board did conclude not to distribute an interim dividend. I think it's simply because there is a lot for us to do in terms of CapEx, our tenant installations, and I think it's pretty evident from what Bongi has been saying in the last period, so that we can see what we have done to our buildings.
Our next slide talks about our SA REIT funds from operations. That gives us a bridge from August 2020 to August 2021, and it basically shows the movements that happened. We started with ZAR 116 million as funds from operations, going to ZAR 178 million funds from operations, which you will see that the biggest one is our savings in our finance cost of ZAR 36 million, our tax saving of ZAR 19 million, municipal recovery savings that we had of ZAR 15 million. Also going to the fact that we've lost ZAR 11 million in dividend, as well as rental income reversions that we've seen taking us to the ZAR 178 million for our bridge. If we move to our next slide, I'm talking about our financial position at this point in time.
Our investment property, as I said earlier, moved from 8.7% in August, going down to 8.227% in February and now 8.258%. The main reason for that difference, as we said earlier, is our CapEx spend between the two periods. Well, between the February and the August period, it was a fair value movement down as well then the CapEx movement upwards. As I stated earlier, our investment in listed securities came down significantly, ZAR 189 million in August, ZAR 157 million in February, and in August now, ZAR 116 million. That takes us to total assets of ZAR 9.3 billion versus ZAR 8.7 billion in February and ZAR 8.8 billion now. When we go to our interest bearing borrowings, it moved from ZAR 687 million in August.
Our February number was ZAR 802 million, and then moving again to ZAR 640 million for short-term interest bearing borrowings. As a result of that can show that the movement then became between the current portion and the non-current portion, meaning we've moved back into a non-current portion for this period. In totality, we still have, unfortunately, a lot of our interest bearing borrowings on short-term. But we are working hard in getting that number moved then from a non-current or from our current liabilities to non-current liabilities. If we go to our next slide, our debt summary talks about we've got floating facilities of ZAR 4.6 billion. We have accrued interest and debt structuring fees taking us into total borrowings, with including interest and fees of ZAR 4.634 billion.
Our interest rate on that is 7.2%. We have interest rate swaps in place of approximately ZAR 1.8 billion. That gives us 40% of our facilities being fixed, and the rate for that is 7%. All right. Going to our SA REIT NAV bridge. Our NAV bridge shows that in Feb 2021, we moved from ZAR 5.06 - ZAR 5.23, and the major contribution, as you can see, is our net property income, therefore moving up that number for us from ZAR 5.06 - ZAR 5.23 for the period. If we move to our next slide, I think, Bongi, that's back to you.
Thank you very much, Marelise. Now to conclude our strategic roadmap, having come from strategy session with the Board, is very clear in terms of deliverables, focusing on conclusion of leases and reducing vacancies, continuing to focus on collections and including arrears. Concerted effort in terms of strengthening the balance sheet through disposals, including Grit shares, continued reduction in LTV, improving our ICR to 2.5 x to drive portfolio optimization and accelerate CapEx program. The business will continue to perform in line with expectation and at a similar rate as H1. We are continually going to focus on maintaining our costs. With that, ladies and gentlemen, thank you very much. We will now take a short break and then open up for questions- and- answers. Thank you very much for attending.
Thank you.
Ladies and gentlemen, there is a bit of a delay for you when you post your questions before we see it on our side. If we could ask you to rather get your questions in sooner rather than later, and we'll be dealing with the questions in the next couple of minutes. Thank you. Ladies and gentlemen, welcome back. Thank you very much for sending through your questions. The first question, Marelise and Bongi Masinga, is from Wayne Kenyon-Slate. He's asking, What is the long-term LTV target, and do you wish to get it lower than the 45% post-February 2023? He's also asking, at what LTV are you able to renegotiate better borrowing terms?
I have stated in my presentation that we are looking to go below 45% at 20 by 2023. I think as we continue trading, as we continue to do our disposals, you know, we would like to get back to, you know, we talk about the glory days of Delta, where at some point we were below 40% or at 40%. But we haven't really focused beyond 2023 in terms of what we are. We are focusing on the number as we have stated today.
Bongi, if I can maybe talk to, you know, our terms in terms of our funders. I think as it is at the moment, we are talking to our funders. The fact that we're at 55.7% is not a deterrent for us to talk to our funders. I’m gonna echo what our funders say, is that they would like to have us back at our covenant levels of 50%. We certainly are aiming to get us back to the 50% covenant level. Our target, ultimately, as Bongi was saying, is getting us below that. I think it doesn't mean that we can't negotiate our debt at this point in time. We certainly are negotiating our debt.
It's also up to us to prove to our banks that we certainly can, you know, stick to those covenant levels.
Mm-hmm.
Thank you.
I mean, if I can conclude that, thanks, Marelise, that is, you know, what the banks are looking for are fundamentals of this business, and that's what we discuss when we talk to them, and the fundamentals are still very strong.
Thank you very much. Mrs. Luanda Bieli is asking: How much would the disposal of the three buildings lower the LTV by? Given the current positive developments, when would the company resume dividend payments?
I'll leave that one to you.
Thank you. Our LTV on the disposal of the Fort Drury and Sediba reduced our LTV by 0.2%. It is marginal. Delta House, when we compare that, unfortunately, when we put that SENS out, it was as of the February 2021 numbers, and that was a 0.6% reduction in LTV. We're not necessarily looking at our disposals to cure our LTV. That is a part, it's part of the progress and the roadmap for us to get there. And it is slowly starting to do that. I think for us to start curing our LTV levels certainly is to start getting our buildings valued higher and getting, as Bongi was saying, fundamentals back on track.
Thank you. Any comments on the resumption of distribution payments?
Well, for us, the target is still. We are hoping to resume 2023, and all our efforts are at that. Sooner, I mean, I wouldn't want to pin anyone's hopes on that.
Thank you. Yusuf Moola from Afrifocus asks, "Delta trades at an 85% discount to net asset value. Don't you think you are ripe for a takeover?
Well, I suppose most companies are a sitting target for a takeover. For us, you know, we focus on the fundamentals of the business. We do see and understand our discount to NAV and, you know, it could happen. We don't spend our time worrying about a potential takeover. I think any business trading at any discount, even 50% discount, is a potential sitting duck for a takeover.
Thanks. Thank you very much. A couple of questions from Mr. Abdul Wahid Albani from Morgan & Co. He's asking, "Is there any likelihood of rental reversions? And if yes, what are the impacts of this going to be?
I mean, the biggest impact will be on our operating cash flow. If we look at it on the other side, our portfolio, a lot of our portfolio was already over-rented with the continuing month-on-month, no renewals, and with the increase kicking in at the end of each year. We were expecting it. It has got an impact, but the other flip side of it is that it means then tenant retention.
On that note, he's also asking regarding the current occupancy levels, is there good traction to get space filled?
As I've stated in my presentation, for us, we're hoping there is traction. We have not focused on it, which part of my presentation covered, as much as we've focused on cash flows and collection and resolving areas, but we think we will. You know, some of our buildings are in a good nick and especially understanding where DPWI is going and some of the users who may actually go and consolidate, we are already starting to plan on the potential increase in vacancy and trying to manage it. I believe we can, but I just need maybe a bit of patience until the end of February 2022. If we do have big news around this, we'll definitely go on SENS before even the end of the financial year.
Thank you, Bongi. A couple of questions on debt finance. Amanda de Wet from Plexus asks, "You mentioned that the banks are wanting your LTV back at 50%. Have they indicated on what expiry terms they would refinance facilities, if you hit this target?
I think, Amanda, if we can add to that, it's not about when we hit it, you know, what will they refinance already at. Our discussions are continuous and ongoing with them. From that perspective, you know, we need to show continuous improvement in all areas, I think, of this business. And that will make, I think, everybody comfortable at the end of the day as to where we're going with our funding together with our business in totality. That is a part of one side of this flip point, and I think the other side of it is definitely getting our operational side operating the way it should.
Thank you. Mr. Abdul Wahid Albani from Morgan & Co again asks, on the interest rates, regarding non-fixed borrowings, is there any action with the banks to negotiate lower interest rates?
There certainly is. Unfortunately, at this point in time, when it comes to the MPC, it's already priced into the market that there's about a 1.5% increase in interest rates. I think it's because of the uncertainty of the MPC actually telling the market as to whether rates will remain stable for a while or not. As a result, that's priced into the market. Currently, should we have to fix these facilities, we will not necessarily get a better rate than where we are at this point in time. In fact, it will push up our cost quite significantly. We are waiting to see what our next MPC meeting would be in order to see where the fixed rate would be and make a decision from that perspective.
Thank you. He also asks whether there's a plan for cost optimization in trying to reduce the administration costs.
Certainly, our focus is on looking at all aspects of this business in terms of cost, not just being our cost to income ratio being so high, we're also looking at the admin side of things. Unfortunately, there's still a bit of admin cost coming through. You know, when we look at the additional audits that took place over the last period, as well as, you know, quite a lot of professional fees when it comes to our legal aspects of the business that we are defending, there certainly will be a bit of cost from that perspective, but we are working hard on getting those numbers down.
Thank you. Nick Rieger from Signal Asset Management is asking, "What do you think the maintenance backlog is? Should I see this as a liability?
No, no. I mean, I wouldn't see it as a liability, but in terms of relationship with our tenants, it does put a bit of a strain. You know, and some of this, remember, if you take on a tenant and you agree on TI and you actually don't do it's not really liability, especially if the building is still in a good nick, but it's a promise that has not been fulfilled.
Thank you, Bongi. Mr. Abdul Wahid Albani asks whether the Grit shares will be sold, or is there a target price that you want to sell it at?
Without being cheeky, as high as we possibly can. I think, yes, the answer to that is yes. The Grit shares for us is non-core. We certainly would like to sell our shares. We'll look at offers coming our way, but we will be very careful as to what levels we will be selling those shares at.
Thank you. Mr. Paulos Mgalangi is asking, just for clarity, is the dividend payment expected to be paid in 2023 for the financial year or the calendar year?
It's always for a financial year.
I would like to close out just with two comments. Mr. Harun Jenna is saying, while I appreciate the internal restructure and many challenges faced from a CapEx, renewing of leases, and extending the fund point of view, as shareholders waiting until 2023 and 2024 on many goals appears long, he would appreciate a quicker turnaround.
Noted.
Finally, sorry, another question from Amanda at Plexus. Please, can you elaborate a bit more on the Orthotouch legal proceedings?
That is, Georgia.
Uh.
I think, Bongi, on the Orthotouch matter, as you are aware, there was a legal claim instituted against the fund of approximately just over ZAR 200 million. We have over the last while been successful in defending that position quite strongly. We have come out to this point in time where, as we sit today, in essence, we have succeeded in winning each and every one of these in court so far. We do expect that they would institute a further action on this matter. However, we are waiting for this to come forward because there was an initial indication from their side. But we are very confident that what we have done when it comes to Orthotouch have been successful, and that we've managed it correctly.
I mean, at this point, they are also looking to amend their claim, which we will not grant them that. From our side, I think we always find them to be very willing to litigate, and we are going to court to ask them to prove the fact that they can actually afford to do this so that we're not dragged-
Mm.
down a path that we know will just cost us. As we win, they actually can't, they don't have the ability to settle.
Thank you very much. Then lastly, a comment from Andrew Russell from Idea Limited. "I just want to say well done and thank you to Bongi and team. A tremendous amount of positive work done. You've laid a solid foundation to fill your buildings.
Thank you.
Thank you.
Ladies and gentlemen, that concludes our session for today. Thank you very much for attending the Delta Property Fund interim results webcast. A recording of the presentation will be available during the course of the day on the website. Many thanks.
Thank you.