Equites' loan facility links cost of debt to its ESG risk-rating score
CAPE TOWN - Equites Property Fund, which focuses on the logistics sector in South Africa and the UK, has concluded a R1.6billion loan facility linking the cost of debt to its ESG (environmental, social and governance) risk-rating score, a first loan of its kind for South African real estate investment trusts.
Chief executive Andrea Taverna-Turisan said yesterday ESG-linked financing facilities were likely to become more prevalent as companies and investors increasingly focus on sustainability and transformation, and these type of financing facilities were already available from some global financiers such as the World Bank. Equites’ facility was reached with Standard Bank.
He said Equites had always made sure it was not just at the forefront of eco-sustainability, but also governance and transformation, with, for instance, 60percent of their team black and the same percentage comprising women.
Also, it had cut its environmental footprint through green building techniques, provided community upliftment through social programmes, reduced energy costs for its tenants, and had lowered its funding costs.
Transformation initiatives had earned it a level 4 B-BBEE rating for the third-consecutive year, with a verified black ownership of 51percent.
The company yesterday reported flat distributable earnings of 74.44cents per share for the six months to August 31, compared with 74.43c in the prior year. Full-year dividend growth of 2percent to 4percent was forecast by the board.
Taverna-Turisan said tenants were operating close to pre-Covid levels, and there were no indications of further defaults or rental deferments.
Net asset value per share increased by 0.4percent to R17.44.
The fair value of the property portfolio increased by 19.7 percent to R16.2bn on August 31, with most of the growth in the property portfolio attributable to pre-let developments in South Africa and the UK.
“The last six months have been the most challenging in our trading history. While the logistics asset class remained resilient relative to other asset classes, the impacts of the lockdowns in both jurisdictions could not be escaped.”
However, there was continued predictability of income and low risk of default in rentals due to the targeting quality assets on long-dated leases, predominance of A-grade tenants, with strong in-force escalations.
In the past six months, the slowing growth in the UK economy was largely offset by the large-scale adoption of e-commerce. In the UK, internet sales as a percentage of retail sales rose to 26percent in the first half of 2020 from 19percent in 2019. As a result, there had been a 48percent increase in the logistics space take-up in the UK in 2020.
While e-commerce penetration in South Africa was low (1.4percent in 2019), research suggested online sales could comprise more than 5percent of retail sales this year, accelerated by lockdowns.
Rental collection rates remained between 98.1 and 100percent over the lockdown, both in South Africa and the UK. There were R30million of rental deferrals granted in South Africa in the six months and £326000 (about R7m) in the UK.
Equites had ongoing developments of close to R1bn in Gauteng and the Western Cape and £12m in Leeds, UK.
Taverna-Turisan said they were well positioned for opportunities.
Equites shares closed 1.77percent lower at R17.19 on the JSE yesterday.