Delta Property Fund has reported improved operational performance for the financial year ended 28 February 2025, despite recording a wider annual net loss of R104.2 million compared to R77.6 million in the previous year.

The real estate investment trust (REIT), which owns a portfolio of commercial office properties largely leased to government and state-linked tenants, increased net operating income by 10.3% to R721.4 million, driven by cost savings and disposals of non-core assets.

Rental income however, declined marginally by 1.9% to R1.14 billion, while property operating expenses fell by 12.8%, aided by reduced municipal rates and tighter cost controls.

Despite this, the company recorded a greater loss due to non-cash fair value adjustments, increased expected credit losses, and higher tax expenses.

Basic and diluted earnings per share fell to -14.6 cents (FY24: -9.3 cents), while headline earnings per share dropped to 10.4 cents from 15.9 cents.

“Our turnaround strategy continues to gain momentum, notwithstanding macro-economic pressures. The office segment we operate in remains exceptionally competitive, and it is pleasing to see the impact of our disposal strategy, prudent debt management, rigorous cost control measures, lease renewals and concerted efforts to reduce property vacancies making an impact,” said the group’s chief executive, Bongi Masinga.

The vacancy rate improved to 31.9%, or 18.4% when excluding assets held for sale. Six non-core properties worth R158 million were disposed of during the year, with further disposals pending.

The weighted average lease expiry decreased slightly to 14.7 months, reflecting short-term lease renewals.

The Group’s loan-to-value ratio remained high at 59.5% (FY24: 59.4%), but interest cover improved to 1.4 times. Total interest-bearing debt reduced marginally to R3.9 billion, with R237.5 million in capital repayments made, partly funded by property sales.

The average rental collection rate was 95.1%, though trade receivables increased to R155.2 million due to delayed payments by some tenants. A bad debt provision of R61 million was recorded.

No dividend was declared for the year, consistent with FY24, as the company focuses on balance sheet stability and reducing debt. The board confirmed that the business remains a going concern.

Delta said it remains committed to improving its financial position through asset sales, cost containment, lease renewals, and continued engagement with lenders to extend debt maturities and reduce interest costs.