Equites Property Fund is on track to own R50bn in a few years’ time, as it exits its youth
Equites, the only listed logistics focused real estate investment trust (Reit) is entering the second phase of its life as it excels post the worst of the Covid-19 pandemic.
CEO Andrea Taverna-Turisan told Property Flash that the past eight years, since Equites listed in 2014, have been its formative in which it laid the basis as a leading industrial Reit with assets in the UK and SA.
“If Equites were a person, I’d say it’s in its early 30s now. We have spent the past eight years sowing our seed as we have expanded our portfolio from R1bn to R25.7bn. In this time, we have consistently delivered returns which outperform our peers,” he said.
“Logistics properties globally continue to outperform other kinds of property assets. They are supported by sustained demand in the tenant and investor markets. We believe that the SA and UK markets have served us exceptionally well,” said Taverna-Turisan.
Continuing the analogy, Taverna-Turisan said Equites is now ready to establish itself as the best logistics warehouse owner in the world. Within the next four years, he expected the fund to own R50bn in assets. He expected Equites to enjoy its busiest year yet in SA in 2023, as it rolled out its development pipeline.
Equites released results at the beginning of May 2022 in which it reported annual dividend per share growth of 5.2% to 162.99 cents for the year to end-February 2022.
At end-February, its assets had grown by a third to R25.7bn, from R19.3bn in February 2021, supported by acquisitions, developments and higher valuations.
“Demand has intensified for the high-end best-in-class logistics properties which we develop, own and manage. In fact, in our financial results for the year to February 2022, as SA and the UK climbed out of the worst of the pandemic, we actually experienced our busiest year ever, funding investment opportunities worth R4.3bn. And, while it may seem on the surface that SA’s prospects are getting worse in 2022 and 2023, we are able to find the returns we desire in this country. I expect the 2023 financial year to be our busiest year in SA yet for various reasons,” he said.
Taverna-Turisan explains that not only is Equites attracting new quality tenants including multinational fast-moving-goods groups such as DSV but many existing global tenants also want to upgrade the space they rent such that they meet environmental requirements set by their parent companies and themselves.
“We offer world class up to date requirements which is why we can attract such top tenants,” said Taverna-Turisan.
Equites’ largest transaction in the financial year was the acquisition of the DSV Campus in SA for R2.05bn, in partnership with Eskom Pension and Provident Fund. The partnership with the Pension and Provident Fund effectively unlocked an attractive alternative source of equity for further expansion. The group also purchased a 50% stake in three properties in Waterfall City from JSE-listed Attacq, for a total consideration of just more than R500m.
Taverna-Turisan said even though Equites may appear to charge significantly more per square metre of space compared to old industrial property owners, tenants who sign up with Equites enjoy benefits which far exceed the difference in rent.
“So, let’s say we charge R75/m2 compared with older, less sophisticated landlords which charge R45/m2. The key is that we offer efficiencies which save tenants more than that differential. Consumers can do more and more and quickly,” he said.
Equites is in an enviable position where it does not need to sell any of its strongly rated assets, according to Taverna-Turisan. It is selling some assets in CT, but these tend to be small and part of its initial listing.
“The assets we will sell are worth approximately R200m. We also own a hangar and a bakery – engaging with owner occupiers
The fund would continue to expand in the UK such that its assets there would eventually eclipse those in SA in terms of value.
“The UK market is much bigger and is responding well after the height of Covid. We are in the A-league now in the UK and we want to enjoy the best of this rebound for commercial property. The UK market has set new records across all metrics, which include a record low vacancy rate, a surge in market rental growth as well as a significant increase in land values. Our partnership with Newlands is capitalising on this golden opportunity where there is a significant mismatch between demand and supply in the market, which will ultimately continue to create substantial value for Equites’ shareholders,” Taverna-Turisan said.
Evan Robins, portfolio manager at Old Mutual Investment Group says Equites continues to meet its ambitious targets and to benefit from skilful capital allocation.
“They have delivered to shareholders even amid the pandemic. While their share price has run hard, there is scope for growth with the company’s management focussed on net asset value and not only dividend growth,” said Robins.