Equites joint venture with Eskom Pension and Provident Fund to acquire a R2.05bn distribution centre
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EQUITES Property Fund and Eskom Pension and Provident Fund (EPPF) have formed a joint venture to acquire a R2.05 billion DSV distribution centre in Gauteng, the first of what the partners believe will become a world-class logistics property portfolio.
Equities said yesterday it would hold 51 percent of the shares in the joint venture company and EPPF would hold the remaining 49 percent. Equites’ total equity contribution to the joint venture would be R732 million, which it would fund from its own cash and debt facilities.
The deal would increase the company/s loan-to-value ratio by 3.1 percent to 31.7 percent.
The joint venture company will acquire the 38-hectare DSV Campus in Gauteng for R2.05bn, on the basis that the property will be leased back to DSV. A long-term “double net” lease agreement would be concluded between DSV Campus and the joint venture company, initially for 10 years.
DSV is currently the fifth largest third-party logistics provider globally, is listed on the Copenhagen Stock Exchange, has 1 300 offices and logistics facilities in more than 80 countries and employs 57 000 people.
Equites chief executive Andrea Taverna-Turisan said in a telephone interview the Danish-owned DSV facility was state-of-the-art and represented a massive investment in South Africa that offered a supply chain solution as good as anywhere in the world today.
“It’s all about efficiency and bringing products as close to the consumer as possible, otherwise the consumer simply chooses another product,” he said.
Equites said in a statement that the deal met its strategy to invest in high-quality assets which meet modern logistics criteria and to focus on a property asset class that had outperformed over time.
Other aspects of Equites’ strategy that the deal encompassed included investing in assets with world-class sustainability elements, growing its relationship with key tenants and creating scale in the portfolio by acquiring an asset with a stable and predictable rental growth profile.
EPPF is one of the largest asset managers in the country, with some R163bn assets under management and this joint venture would create a mutually beneficial partnership built for the future, said Taverna-Turisan.
“Through this joint venture, Equites has the ability to potentially dispose of a stake in its South African properties to the joint venture company in the future, which ensures EPPF will obtain exposure to the highly coveted logistics sector, whilst providing Equites with an alternative source of equity for its attractive development pipeline both in the UK and in South Africa,” he said.
The DSV property being acquired consists of about 87 000m² of warehouse space, 40 000m² of cross-dock space, and a three-storey office facility of over 10 500m².
It includes photovoltaic capacity to generate 0.99MW of electricity, five boreholes, a water filtration plant, double glazing for heat and acoustic improvement, and LED lighting as part of improving its environmental impact.
Equites lifted its distribution per share by 5.3 percent to 78.38 cents in the six months to August as it continued to ride a wave of global change in trade that is causing unprecedented demand for additional “big box” warehouse and distribution centres.
Equites also has a development joint venture in the UK, with Newlands Property Developments, and the pipeline of development opportunities within the UK joint venture was anticipated to exceed £800m (R16bn) over the next three to five years, and which was hoped would enable Equites to build scale in the top end of the UK logistics market.
EPPF, according to its website, saw the value of its investment assets grow to around R163bn in the year to March 31, 2021, from R114bn at the end of March 2020, as the value of its investments assets recovered following the Covid-19-related market slump in 2020.