base building here..
from a tweet :
A more speculative small cap REIT is Delta Property Fund. It trades at a 80% discount to NAV.
The reason for the discount is very short term leases from government, although they've been concluding 5-year leases recently (see this morning's SENS).
At the trading update on 28 February, they disclosed a LTV of 44%, so they're still within loan covenants. According to CFO, valuations already discount the anticipated negative reversions on government leases.
Investec has recently been building a stake at higher levels than the current price below R2.
Delta has guided for lower distributions this year. One of the main reasons for this is very high, punitive interest rates on their loans due to the short WALE (duration) of leases. Hopefully this will change with longer term leases.
If Delta can sign more 5-year leases, you're looking at a 20% yield for next few years with 6.5% escalations every year.
I have factored in that Delta might retain a portion of distributable income (could be as high as 25%) for building improvements (they have old B and C grade buildings). This will keep LTV ratio at current levels (no need for borrowing).
Delta has valued their buildings at cap rates between 11% and 12%, and based on anticipated reduced lease renewals from government. This seems fair, or at least fair enough not to warrant a 80% discount..
so someones thinking like me...
I see lots of value and dividend returns here...not immedicate but over the next few years!!