October 15 2026 11:20
CAPE TOWN, SOUTH AFRICA
JSE-listed specialist logistics landlord Equites Property Fund (JSE: EQU) on Thursday declared an interim dividend of 72.57 cents per share for the six months to end-August 2026, up 5.1% on the 69.04 cents it paid a year ago.
The Cape Town-based real estate investment trust (Reit) reaffirmed its full-year guidance of 147.7 to 150.5 cents per share for the year to end-February 2027. That represents growth of 5% to 7% on the 141.01 cents paid for FY26, at a 100% pay-out ratio.
The headline of the period, however, was not the dividend. It was the substantial completion of Equites’ exit from the UK, a market it entered in 2016. In May the group concluded the £200.5m sale of its Aviva portfolio of five income-producing UK distribution centres, releasing about £95m of net cash after the associated debt was settled. The UK didn’t work out for Equites.
That sale reshaped the balance sheet. The loan-to-value (LTV) ratio fell seven percentage points to 28.1%, from 35.1% in February, and the group now has more firepower than it can immediately deploy into South African logistics developments.
The key numbers from the results:
- Dividend: interim distribution of 72.57 cents per share, up 5.1%, with FY27 guidance of 147.7 to 150.5 cents per share reaffirmed.
- Distributable earnings: R630.1m, up from R570.3m in the comparable period.
- Net asset value (NAV): up 4.5% to R17.43 per share, from R16.69 at end-February 2026.
- Balance sheet: LTV of 28.1% (Feb-26: 35.1%) and R2.9bn of cash and undrawn facilities, plus R1.2bn in liquid UK-listed Reit shares.
- Portfolio: valued at R25.4bn, down from R28.7bn after the Aviva disposal, with vacancy at 1.5%.
- South Africa: like-for-like rental growth of 5.3% (6.1% excluding the Waterfall properties) and like-for-like valuation growth of 2.8%.
- Developments: R600m spent on developments and acquisitions, with seven projects underway worth R2.4bn on completion.
- Earnings: headline earnings per share (HEPS) of 88.9 cents, up from 53.1 cents.
What drove the dividend
The South African portfolio did the heavy lifting. Distribution per share rose by 3.53 cents on the prior interim, and like-for-like rental growth in SA alone added 4.18 cents.
That 5.3% rental growth figure was achieved after absorbing negative rental reversions on the Waterfall portfolio. Management said these assets had seen escalations outpace market rentals for a period and are now let at market levels, so they should contribute to growth from here.
Short vacancies also weighed. Meadowview site 1-D stood empty for most of the period and the Lords View unit formerly occupied by Skyworth was vacant. The Meadowview space has since been let, with the lease starting on 1 September 2026.
Equites published a bridge showing how it got from 69.04 cents to 72.57 cents:
| Driver | Impact (cents) |
|---|---|
| 1H26 distribution | 69.04 |
| SA like-for-like rental growth | +4.18 |
| Lower cost of funding | +1.07 |
| Lower distributable admin costs | +0.65 |
| Solar and other income | +0.29 |
| Development dilution | -0.58 |
| Aviva disposal dilution | -0.71 |
| ENGL write-downs | -1.37 |
| 1H27 distribution | 72.57 |
The biggest drag came from the tail end of the UK development business. Write-downs on Equites Newlands Group (ENGL) land at Peterborough West, Goldthorpe and Thrapston cost 1.37 cents.
The Aviva sale itself was also slightly dilutive, by 0.71 cents. Although the portfolio sold on a 5.5% yield, the positive carry on its cheap UK debt meant Equites was effectively earning about 7% on its equity. Management expects that dilution to reverse as the cash is moved into higher-yielding SA developments.
Distributable admin costs fell as the UK operation wound down, adding 0.65 cents. Gross admin costs rose, but mainly because of a higher non-cash share-based payment charge.
The UK exit
Equites announced in May 2025 that it would sell its UK portfolio and bring the capital home. Eighteen months later, that job is almost complete.
The Aviva portfolio of five distribution centres was sold in May 2026 to a fund managed by ICG Real Estate for £200.5m. Once the £105m (R2.3bn) Aviva debt facility was settled, about £95m was released to Equites.
Management said the sale was concluded against a tough UK backdrop of persistently high gilt yields and subdued rental growth, which was limiting capital growth across UK logistics. The board’s view was that the portfolio had largely realised its value for this cycle.
The price came in slightly below book value, which knocked 7 cents off NAV. Equites said it chose to proceed anyway, given the uncertainty at the time, with UK 10-year gilt yields tracking well above 5%.
Parking the cash in UK Reits
One of the more unusual features of these results is what Equites did with the money. It could not redeploy the full amount straight away. Its SA development pipeline was not yet big enough to absorb it, suitable acquisitions were scarce, its revolving credit facilities were already undrawn, and listed bonds cannot be redeemed early.
So the group invested about 75% of the net proceeds in three liquid, FTSE-listed UK logistics Reits. This keeps the capital earning property income, and keeps Equites compliant with its own Reit requirements, while it waits for SA projects to need funding. The holdings were worth R1.2bn at end-August.
The bet has paid off so far. When Prologis made an offer for 100% of Segro, Equites was able to crystallise a gain on its position, which added 12 cents to NAV. Management stressed the shares are a temporary home for the capital and will be sold over the next 18 to 24 months as SA developments draw down funds.
What is left in the UK
Three UK assets remain:
- DHL Leeds: a rent review settled at a base rent of £9.17 per square foot, a 53% uplift on the previous £6.00. The asset is unencumbered and is being marketed, with a sale expected within 12 months.
- Thrapston: Equites expects developer Newlands to draw down its land option in the second half of FY27.
- Basingstoke: management will commit limited capital while it looks for a solution that maximises shareholder value.
Equites also expects to receive the final payment for the JD.com development at Coton Park this month. With so little UK exposure left, the group said movements in the rand-sterling exchange rate now have minimal impact on its numbers.
South Africa: income-driven valuation growth
The group’s portfolio fell from R28.7bn in February to R25.4bn, almost entirely because of the Aviva sale. Underneath that, the SA business grew.
The SA income-producing portfolio recorded R587m of fair value uplifts, a like-for-like increase of 2.8%. Equites stressed this was driven by income rather than yield compression. Valuers held discount rates broadly flat at 12.5% to 13.0%, and the growth reflected stronger in-place and market rentals as 3PL and retailer demand meets constrained supply in its core nodes.
Adding the distribution to the valuation growth, the group put its total accounting return at about 18.5% on an annualised basis.
| Property type | Share of income-producing portfolio | Average value (R/m²) | Net initial yield |
|---|---|---|---|
| Modern logistics facilities | 66% | 13,403 | 7.8% |
| Logistics campus | 27% | 15,741 | 8.3% |
| Cross-dock/ultra-low coverage | 6% | 14,042 | 8.6% |
| Other | 1% | 21,727 | 8.3% |
| Total | 100% | 14,076 | 8.0% |
The portfolio’s weighted average net initial yield is 7.98%, or 8.32% excluding the Shoprite assets held in its 50.1%-owned Retail Logistics Fund (RLF). That gap shows the valuation premium attached to RLF’s long-dated leases.
One SA property was sold: Digistics Waterfall went for R117m in April.
Leasing, vacancy and escalations
Vacancy rose to 1.5% from 0.3% in February, matching the level a year ago. There were three vacancies at end-August. One, in Meadowview, has since been let to an A-grade tenant with occupation from 1 September, and the other two are being marketed.
Two new tenants arrived at Meadowview. Sailun Africa took 12,206m² at site 1-F on a five-year lease escalating at 7.0% a year, and P.Serassis took 5,097m² at site 1-D on a ten-year lease escalating at 6.5%. Equites said the gap reflects its policy of accepting a lower escalation in exchange for a longer lease.
Two renewals covering about 26,000m² were concluded in the Meadowview node, with a further 66,645m² due for renewal in FY28.
The weighted average lease expiry (WALE) eased to 13.0 years from 13.7 years. Weighted average escalations remain at 6.1%. With the Reserve Bank having moved to a 3% inflation target, Equites argued this now represents real rental growth well above inflation.
R2.4bn development pipeline, mostly pre-let
Developments remain Equites’ main route for putting capital to work. The group spent R600m on developments and acquisitions in the six months, and seven projects are now underway. Together they cover about 200,000m² of space and R2.4bn of capital value on completion, with R1.3bn still to be spent.
All are being developed at yields on cost of 8% to 9%, ahead of the group’s marginal cost of debt, and are scheduled for completion between September 2026 and August 2027.
| Tenant | Location | GLA (m²) | Capital value | Still to spend | Completion | Equites share |
|---|---|---|---|---|---|---|
| Tiger Brands | Riverfields | 89,000 | R995m | R500m | Apr-27 | 50% |
| Takealot Fulfilment Solutions* | Riverfields | 34,800 | R420m | R280m | Aug-27 | 50% |
| Shoprite | Benoni | 10,944 | R278m | R187m | Dec-26 | 50.1% |
| DHL | Boksburg | 20,540 | R221m | R183m | Jun-27 | 100% |
| Speculative | Jet Park | 17,000 | R210m | R41m | Sep-26 | 100% |
| Speculative | Riverfields | 19,631 | R210m | R32m | Oct-26 | 100% |
| Premier FMCG | Lords View | 7,226 | R94m | R33m | Oct-26 | 75% |
*Construction started in September 2026.
One project was completed in the period: a 12,206m² facility for Sailun Africa at Meadowview, worth R160m.
The two speculative units at Jet Park and Riverfields total 36,631m² and R420m of capital value, with only R73m left to spend. Both complete in the second half of FY27 and are being actively marketed.
New sites: DHL and Shoprite
Two new sites were secured. In Boksburg, Equites was chosen as preferred developer and landlord through a formal request for proposals (RFP) by DHL, its first lease with the global logistics group in South Africa. The 20,540m² facility will handle DHL’s bulk distribution for Colgate-Palmolive. The land cost R32m and the total development cost is expected to be R221m.
In Benoni, RLF bought a R91m site that has been let to Shoprite on a new ten-year lease, with about R187m of further development spend expected in the second half of FY27.
Land is becoming the constraint. SA development land makes up only 1.2% of the portfolio, and Equites called finding new land a strategic imperative. In September it secured more land in the Riverfields area of Witfontein, along the R21 corridor, through its partnership with Tridevco, and it is exploring further purchases and land options.
A deliberately under-geared balance sheet
Equites is now carrying less debt than it wants to. Management described the balance sheet as under-geared relative to its through-the-cycle target range, and said gearing will rise gradually as the UK proceeds are spent on SA developments.
Crucially, the group says it can fund a substantial amount of development from existing headroom without going to the debt or equity markets.
| Treasury metric | Aug-26 | Feb-26 | Aug-25 |
|---|---|---|---|
| Loan-to-value | 28.1% | 35.1% | 37.2% |
| Interest cover | 3.2x | 2.9x | 2.9x |
| Cash and undrawn facilities | R2.9bn | R3.1bn | R3.4bn |
| Weighted average debt maturity | 2.9 years | 2.9 years | 3.2 years |
| Debt hedged | 83.4% | 88.1% | 96.9% |
| SA cost of debt | 8.23% | 8.13% | 8.25% |
The hedging is proving its worth. The interest rate backdrop has turned: after cutting rates by a cumulative 150 basis points to November 2025, the South African Reserve Bank raised the repo rate by 25 basis points in both May and September 2026, to 7.25%. Forward rate agreements are pricing in at least one more hike.
Because most of its debt is hedged, Equites’ SA cost of debt rose only marginally, to 8.23%. A 100 basis point move in rates now changes its cost of debt by just 20 basis points.
The group also continues to borrow more cheaply. In June it raised R650m in a debt auction, with a three-year note priced at ZARONIA plus 90 basis points and a five-year note at ZARONIA plus 103 basis points. Those spreads were 37 and 21 basis points tighter than its previous three- and five-year issues. GCR affirmed Equites’ AA-(ZA) credit rating with a stable outlook in June.
About R1.5bn of debt matures in the next 12 months, of which R0.8bn of listed notes will be refinanced at a November 2026 auction.
Solar, water and green buildings
Installed solar capacity grew to 28.2MW, and 75% of the portfolio’s buildings now have solar PV. Two more power purchase agreements were signed, and Equites plans to commission a further 5.1MW over the next 24 months at a cost of about R62m.
EDGE-certified green buildings make up 60% of the portfolio. Equites is now turning its attention to water: its first water reuse treatment plant, at the Riverfields precinct, is due to start operating in the second half of FY27. The group also kept its Level 2 B-BBEE rating.
Outlook
Equites reaffirmed its FY27 guidance of 147.7 to 150.5 cents per share, or 5% to 7% growth, at a 100% pay-out ratio. It said the assumptions behind the guidance are unchanged from those set out in May.
The story for the next 18 to 24 months is redeployment. With the UK all but gone, the R1.2bn of UK Reit shares will be sold down to fund SA developments that yield 8% to 9%. As that happens, the dilution from the Aviva sale should unwind and gearing should drift back towards target.
Management remains bullish on demand. It said structural undersupply persists in prime logistics nodes, with retailers upgrading supply chains, third-party logistics providers expanding for e-commerce and FMCG groups investing in modern facilities. Higher fuel costs after this year’s oil price shock are adding pressure on occupiers to find efficient, well-located space.
The interim dividend will be paid on Monday, 9 November 2026. The last day to trade to qualify is Monday, 2 November, and shareholders can elect to reinvest their dividend in new Equites shares.
247@propertyflash.co.za
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