The South African Revenue Services (SARS) will from now on owe Delta shareholders, because last month their company purchased the well known (or dreaded?) SARS Building that is located on the corner of Teddington and De Lange Roads in Bellville.
Delta, one might say, has some affection for SARS and government tenants – which might be regarded as risk free rent payers. The company’s investor presentation notes an “excellent and long-standing relationship with government and SARS.” CBN notes Delta also owns the SARS Building in Kimberley.
Delta bought the SARS Building from Schaeffer Technologies Trust for R185m. The deal markedly increases Delta’s presence in the Western Cape as the company currently only holds the National Prosecuting Authority (NPA) building as its sole Cape-based asset. Interestingly the SARS property is actually described as multi-tenanted office building, but the bulk of the space is earmarked for SARS.
Delta said the acquisition was in line with its strategy – the property being a well-established property with a low risk tenant. “It represents an attractive investment that will enhance the overall quality and value of the portfolio.” Delta said there was currently a negotiated three-year letter of intent in place with SARS. The company intends to convert this to a lease once transfer has taken place.
The deal – from a numbers perspective – looks sweet. The building comprises 17,270m2 with a weighted average rental per square metre of R87,58. Delta forecasts rental of R12,7m in the eight months to end February 2014, and R6,75m in after tax profits.
For the full 12 months to end February 2015, Delta pencils in rental of R20,4m and profits of R11,1m after SARS has taken its cut.
Delta’s vision is to own a balanced portfolio of value-enhancing assets valued at around R7bn by 2017.
While Delta intends to achieve greater sector diversification by reducing its reliance on government tenants within the next five years, directors anticipated that the majority of leases would remain Government and SARS leases in the medium-term.
By Jenni McCann
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