Equites Property Fund impresses investors

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Equites CEO Andrea Taverna-Turisan says prime logistics assets had outperformed retail with strong demand being driven by the growth in e-commerce. Equites CEO Andrea Taverna-Turisan says prime logistics assets had outperformed retail with strong demand being driven by the growth in e-commerce.

Equites Property Fund has impressed investors yet again with financial results that showed double-digit dividend growth while its peers have struggled to keep up with inflation.

In the six months to August, Equites grew its dividend 11.7%, due to strong rental growth, sound management and a number of well-timed acquisitions.

The real estate investment trust has been a hugely successful listing since it joined the JSE in June 2014, expanding its assets from R1bn to R10.1bn over that time, and achieving an annualised total return of 24.8% each year. 

It has also expanded into the UK in the past couple of years, with its investments there making up about 20% of its annual revenue in the reporting period.

CEO Andrea Taverna-Turisan said he had nearly realised his vision of owning high-end distribution centres only. This was on track as the company had five office buildings and some small industrial properties to sell during the next year and a half.

Equites delivered one of the strongest sets of financial results this reporting season. While the company delivered double-digit dividend growth, many other property groups only managed to grow their income payments between 1% and 4%. Some funds have even seen their dividends shrink.

The company managed to sign leases with tenants at better rates because of the high quality of its assets, which Taverna-Turisan said were “best in class”.

The board approved an interim dividend of 68.12c per share for the six months to August. The net asset value per share increased 9.5% to R16.67 in the period compared with a year ago. 

The company, which is the only group solely invested in industrial assets that is listed on the JSE, reported 49% growth in the fair value of its property portfolio, from R6.8bn to R10.1bn.

Distribution centres and high-tech warehouses, which are classified as prime logistics assets, are among the most sought-after property assets in SA, with companies wanting to benefit from future growth in online shopping and seeking to sign up groups that want to establish supply chains.

Taverna-Turisan said prime logistics assets had outperformed retail and commercial property, with strong demand being driven by the growth in e-commerce and retailers increasing efficiencies through sophisticated distribution networks.

“This is the hottest property sector in the world. A wall of cash is leaving retail property and going to logistics. We haven’t seen such a notable restructuring of commercial property since the late 1960s when people started to build shopping centres for the first time,” he said.

He said while 20% of retail sales in the UK were online, only 1% of retail sales in SA were online. This suggested there would be scope for Equites to build assets in SA in the future.

Vacancies fell to 0.2% from 2% at year-end following the letting of a logistics property at Cape Town International Airport.

Richard Colburn, equity analyst at Sanlam Private Wealth, said Equites had once again impressed investors with a strong set of results that were ahead of his team’s expectations. 

“They are offering predictable income growth from a well-managed portfolio. I would say they are best of breed when it comes to logistics property owners. The market tends to reward excellence and companies which look difficult to replicate,” he said.

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Industrial Property Market  |  Equites Property Fund  |  Andrea Taverna-Turisan  |  Richard Colburn

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