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Equites ready for another year of strong growth on all fronts

EQUITIES Property says its UK portfolio performed above expectations, increasing by 13 percent in value. File photo.

EQUITIES Property says its UK portfolio performed above expectations, increasing by 13 percent in value. File photo.

Published May 5, 2022

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EQUITIES Property Fund grew distribution per share 5.2 percent to 162.99 cents after its property portfolio continued to benefit from the global boom in warehouse, logistics and distribution type facilities, CEO Andrea Taverna-Turisan said yesterday.

Net asset value per share increased 7.9 percent to R18.61 and delivered a 9.4 percent distribution yield, culminating in a total return of 17.3 percent for the year.

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Taverna-Turisan said in a telephone interview they had a “massive year ahead” in terms of development pipeline, and as indication of the health of the business, “we haven’t got any vacancies across our portfolio at all, not even a square metre.”

The share price of South Africa’s only listed logistics-focused property stock was up 0.92 percent R20.89 yesterday, with the price up more than 13 percent over a year.

The board decided to declare 100 percent of distributable earnings as a dividend biannually, and would continue to promote its dividend reinvestment programme as a tax-efficient way to retain some distributable earnings for future expansion.

Equites’ portfolio value grew to R25.7 billion at February 28, from R1bn at listing in 2014, through acquisitions and developments in its SA and UK portfolios.

Taverna-Turisan said logistics properties globally continueD to outperform, supported by sustained demand in the tenant and investor markets. He said they had developed their own portfolio to high specifications and he was confident they would trade through existing facilities for the next 30 years.

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He said the UK market was especially strong and had set new records, including a record low vacancy rate, a surge in market rental growth as well as a significant increase in land values.

In SA, “prospects have never been better” in terms of the potential pipeline of developments as well as rental growth expectations, as the national vacancy rate for A-grade warehousing was at an all-time low and companies increased their focus on supply chain optimisation.

Some R4.3bn of investment opportunities were funded in the year, with the largest transaction being the acquisition of DSV Campus in SA for R2.05bn in partnership with Eskom Pension and Provident Fund.

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The partnership unlocked an alternative source of equity for further expansion. The group purchased a 50 percent stake in three properties in Waterfall from Attacq, for over R500 million.

Equites completed a R317m logistics campus that was let to Sandvik in Gauteng on a 10-year lease. Ongoing developments include a flagship warehouse for Cargo Compass SA (R259m), a facility for Nioro Plastics (R88m), an extension to the Premier FMCG facility in Lords View (R97m) and an extension to TFG’s facility in Lords View (R190m), all of which were expected to be completed during the 2023 financial year.

In the UK, Equites Newlands Group (ENGL), the venture with Newlands Property Developments, completed its first development; being a last-mile logistics facility tenanted by Amazon on a 15-year lease with a capital value of R1bn.

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ENGL was in the final stages of its second development, a hub distribution facility led by Hermes (which recently changed its name to Evri), adding scale of the UK portfolio. The property was let to Hermes on a 20-year lease.

The company raised R2.7bn in equity capital through two oversubscribed accelerated book-builds, as well as through dividend reinvestment programmes.

More than R2.5bn of debt was refinanced. A well-oversubscribed debt auction in November 2021 raised about R1bn, without putting loan-to-value (LTV) at risk, he said.

Equites’ UK portfolio performed above expectations, increasing by 13 percent in value (independently valued) and generating a geared total return on equity of 25 percent in sterling.

Equites was in the final stages of negotiating five new logistics developments in SA, with a combined capital expenditure in excess of R1.8bn. Group loan to value was conservative at 31.5 percent. Distribution growth of between 4 percent and 6 percent was forecast for the new financial year.

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