May 19 2025 16:22
Andrea Taverna-Turisan
SOUTH AFRICA AND THE UNITED KINGDOM
Equites Property Fund, the industrial high-end logistics landlord, has seen its share price climb 11.44% to R15.50 in the past 90 days.
This follows the group having announced its results for the 2025 financial year to end-February last Thursday, showcasing strong performance from both the South African and United Kingdom portfolios, it said.
The company is gradually exiting the UK and looking for more opportunities. Other offshore markets do not quite appeal at this stage. Equites has been listed on the JSE since June 2024. Equites was helped by a significantly reduced loan-to-value (LTV) ratio and low credit spreads in the sector during the 2025 financial year.
LTV refers to a company’s debt relative to its asset base and measures the health of a property company’s balance sheet.
“With the focus on like-for-like (LFL) rental growth both in SA and the UK, limited vacancy during the period and the ability to generate revenue from renewable energy, the group has delivered distribution per share of 133.92 cents per share, which is on the upper end of the previously provided guidance,” said CEO Andrea Taverna-Turisan.
Equites is the only specialist logistics real estate investment trust (Reit) listed on the JSE. From a returns perspective, the industrial sector remained the most favourable property subsector in SA in 2024, with a total return of 13.2% for the calendar year according to MSCI. The low vacancy rate, high rental growth and overall sector outperformance were fuelled by intensifying demand from retailers and third party logistics.
“Limited supply due to a shortage of appropriately zoned and serviced land, along with prohibitive funding costs for many developers, has further constrained availability. The demand for ESG-compliant space remains a key theme driving demand, particularly among multi-national tenants,” the group said.
Equites’ logistics properties are let to A-grade tenants on long-dated leases as much as possible. Equites’ portfolio fundamentals are exceedingly robust, Taverna-Turisan said. The R27.7bn portfolio was 99.9% occupied, with a WALE of 14 years and strong escalation clauses.
Equites’ R21.1 billion South African portfolio is the cornerstone of the business and delivered LFL rental growth of 5.9%, valuation growth of 6.0%, a WALE of 14.1 years and no vacancy at year-end, it said.
The group disposed of several smaller, specialised, and non-ESG compliant assets over the past 24 months. The left over portfolio would provide high-income predictability and robust rental and capital growth opportunities aligned with Equites’ commitment to its sustainability objectives, it said.
Equites’ UK portfolio delivered rental growth over the period, with three assets undergoing rent reviews, resulting in uplifts of between 19% and 69%. The valuations have remained reasonably flat with a 1.0% uplift in GBP terms. The UK portfolio has a WALE of 13.1 years with only a single ancillary unit, representing 1.5% of the UK portfolio, vacant at year-end.
The group acquired and developed 14 assets in the UK, with a cumulative development value exceeding £450m. These assets reached a peak value of £550m, reflecting the value created over the past nine years. However, as market conditions in the UK changed, the group needed to reassess whether this capital allocation would yield the highest possible returns for shareholders.
Seven of these assets, along with the Newlands development platform, have already been sold, and the Board has now decided to explore the sale of the remaining UK portfolio, it said. This decision was driven by the maturity of the existing assets and the opportunity to reinvest the proceeds in South Africa. The proceeds from the sales could significantly reduce the loan-to-value (LTV) ratio. Plans are in place to reinvest this capital into newly developed, ESG-compliant logistics facilities on long-term leases in South Africa, which will enhance shareholder value over the long term.
In South Africa, Equites successfully completed a 16,721m² facility at Jet Park in March 2024, let to SPAR Encore. The Jet Park precinct has proven to be a resounding success, and the Group expects to develop the remainder of the Jet Park land within 18 months.
Equites also completed R195m of improvements to its Shoprite Centurion facility, as part of the existing lease expiring in 2044. Two other Shoprite facilities were completed, both with 20-year lease, the R1.2bn billion development of an 80,531m2 facility at Wells Estate, Eastern Cape and a groundbreaking R1.3bn campus in Riverfields, Gauteng.
The group reduced its LTV from 39.6% to 36.0%, despite R1.5bn construction and development spending in 2025 financial year. The reduction was driven by R1.4bn of assets sold in SA at a premium to book value of 1% and R1bn of assets sold in the UK at a discount of 0.5%,]. Successful dividend reinvestment options for the two dividends during the year also contributed to the lower LTV.
Equites has R2.9bn in cash and undrawn facilities, and sufficient funding to meet maturities without raising new debt. The lower LTV also presents the group with an opportunity to repurchase its shares where value-enhancing.
Over the past 24 months, Equities started implementing Power Purchasing Agreements (PPAs) to sell renewable energy generated on Equites’ rooftops to tenants at a discount to prevailing tariffs. Equites has entered into a wheeling agreement in the City of Cape Town and has six PPAs in place, and the intention is to grow this revenue component. The group is looking to increase wheeling capacity through engagement with municipalities, given its capability to generate excess energy from large-scale installations on entire roof space, and capitalise on rates of return well in excess of typical property returns. The execution of these initiatives delivers direct value to tenants while reinforcing the group’s commitment to its sustainability objectives, generating alternative revenue streams, and contributing to energy security in SA.
Equites’ board expected its distribution per share (DPS) to increase at a rate above inflation going forward, within a target range of 140.62 cents to 143.29 cents per share, reflecting growth of between 5% and 7%. The Board’s DPS guidance is premised on its tenant base, the completion of several large-scale developments at Riverfields, Wells Estate and Canelands in financial year 2025, enhancing revenue in financial year 2026, and the certainty of overhead costs.
alistair@propertyflash.co.za