Equites Property Fund has published its interim results for the six months ended 31st August 2024, declaring a distribution per share of 66.50 cents in line with full year guidance of 130 to 135 cents per share.
The REIT says that both its South African and UK property portfolios are performing well, driven by strong like-for-like net property income growth, record-low vacancies and improved property valuations further supported by refinanced debt at significantly tighter spreads and a 65% uptake of its dividend reinvestment (DRIP) programme.
The Group’s R28.3 billion portfolio is fully let with a weighted average lease expiry (WALE) of 13.2 years with 99% of its rental income derived from A-grade tenants and escalation clauses.
“The Group continued with its successful recycling of capital out of older, non-core assets into new developments on existing land holdings, disposing of a further R0.6 billion of properties. Together with the DRIP programme, this has enabled R0.9 billion investment in developing state-of-the-art prime logistics properties on existing land holdings. These developments will further reinforce the quality and durability of the portfolio,” says CEO, Andrea Taverna-Turisan.
Equites completed a development in Jet Park in March 2024 which is let to the Spar Group and a R0.2 billion extension of the Centurion facility under an existing lease which expires in 2044. The Group also completed the construction of a campus for Shoprite in Riverfields, Gauteng. The total capital value of the asset is R1.4 billion, let to the retailer on a 20-year lease.
In addition to disposing of R0.6 billion of properties during the period, Equites expects to dispose of R2.4 billion assets before yearend.
One of the Group’s highlights during the period was its exit from the ENGL development platform, marking a change in strategy which Equites embarked on a year ago. Necessitated by a change in global macro-economic conditions, the sale includes a portion of its assets on the platform for £10 million. The remaining sites are excluded from the transaction until these schemes are unlocked through forward-funded development or outright sales, allowing the Group to redeploy proceeds to higher-yielding opportunities.
Equites has R14.5 billion in debt facilities with a weighted average debt maturity profile of 3.5 years and R2.2 billion in cash and undrawn facilities. At period end, the Group had hedged 86% of debt maturing after one year with an LTV ratio of 41% at 31 August 2024, which it estimates to reduce to 38% by yearend upon completion of the identified disposals. Its interest coverage ratio increased to 2.4 times in the period, driven by the significant quantum of developments over the preceding 18 months.
The Group continues to receive strong support from lending institutions and debt capital markets in South Africa. Equites raised further 7-year funding through the private placement of R400 million at 3mJ+153bp and auctioned a R500 million, 5-year note in July at 3mJ+135bp. Equites has an unencumbered asset ratio of 53.8%, an increase in the proportion of unsecured debt. The cost of debt continues to decrease due to tightening credit spreads and effective hedging. GCR Ratings affirmed the national scale long- and short-term issuer ratings of Equites Property Fund at AA-(ZA) and A1+(ZA), respectively, in June 2024 with a Stable outlook.
Its strategy on solar PV is designed to provide occupiers with a comprehensive, maintenance-free solution through a Purchase Power Agreement (PPA). Total installed solar capacity grew to 23.5 MW while the number of assets with solar PV increased to 32. Renewable energy as a percentage of total grid energy consumed increased to 18.6% with 47% of the SA portfolio now equipped with solar. Within the next 18 to 36 months, the installed solar capacity is planned to increase to 29 MW.
Water security in its portfolio is being managed by introducing wastewater treatment plants, with the Group achieving its first EDGE net-zero carbon certification during the period.
“Equites remains confident that inexorable structural drivers will support strong, long-term demand for high-quality logistics assets. Our impeccable portfolio and track record of developing world-class facilities will continue to attract blue-chip clients and support sustainable value creation for shareholders over time.”
