Real estate investment trust (Reit) Equites Property achieved 12.2% year-on-year growth in distributions a share to R1.23 for the financial year ended February 28 – cementing the company’s record of strong distribution that exceeds full year guidance.
The growth in distribution for the year was primarily attributable to like-for-like rental growth that remained strong, contributing 9% to overall distributions a share growth.
Since the company’s JSE listing in 2014, Equites has provided its initial investors with a total return of 138%.
The Reit’s net asset value (NAV) a share grew 8.8% year-on-year to R15.36.
Equites disposed of four commercial properties, in Cape Town, during the financial year, contributing 0.6% to distributions a share growth; and raising capital at a premium to NAV created a differential between the marginal cost of debt and the effective yield of the equity price achieved, which added 0.9% to distributions a share growth.
The company had 30% growth in fair value of its property portfolio from R6.2-billion to R8.1-billion, comprising a total gross lettable area (GLA) of 444 175 m2 of predominantly industrial letting property.
Equites’ revenue is 89% derived from blue-chip tenants on long leases, with 76.1% of leases expiring more than four years into the future.
Seven leases that are due for renewal in the 2019 financial year have already been renewed.
Equites continues to see strong demand for modern distribution centres in the major logistics nodes in both South Africa and the UK. This growth is driven by the evolution of the retail supply chain, which places emphasis on modern logistics facilities driving efficiencies in the process and the accelerating impact of e-commerce.
Equites has a committed development and acquisition pipeline of R930-million in South Africa and R855-million in the UK.
Equites concluded its third acquisition in the UK – a 19 511 m2 cross-docking distribution centre in Coventry, England – for £41-million, in December. The property is let on a 15-year lease to Kuehne + Nagel.
Equites entered into a development funding agreement for a distribution centre to be let to DHL International, which is situated in Reading, England, on a 15-year lease. The agreement comprised the acquisition of 7.96 acres of vacant land for £9.7-million and a development funding agreement in terms of which Equites will fund the development of a 9 325 m2 ‘last mile’ distribution warehouse to the value of £15.9-million. The expected completion date for this warehouse is December.
Additionally, Equites entered into an agreement to develop a distribution centre to be let to DSV Solutions, situated in Peterborough, England, on a ten-year lease. The agreement comprised the acquisition of 13.2 acres of vacant land for £4.7-million and a development funding agreement in terms of which Equites will fund the development of a 27 871 m2 distribution warehouse to the value of £25.3-million. The expected completion date for this warehouse is August.
SOUTH AFRICAN DEVELOPMENTS
During the 2018 financial year, Equites completed construction of a 28 527 m2 distribution centre and offices for Röhlig-Grindrod, in Meadowview, Gauteng. The company signed a ten-year lease with 7.95% escalation.
Additionally, Equites completed a 3 280 m2 distribution centre for Imperial Logistics, also in Meadowview, which has a three-year lease with 7.5% escalation.
The company also concluded a development agreement with Federal Mogul of South Africa for the construction of a warehouse with 9 313 m2 GLA and a capital value of R95-million.
The development lease includes an option to extend the warehouse by a further 5 000 m2, should the tenant be willing to expand. The warehouse and office will serve as the South African headquarters of the global business and estimated completion is February 2019.
Equites has acquired land holdings of 9.6 ha in Meadowview, Gauteng, and 12.1 ha in Lords View, Gauteng, with a strong conviction that these will continue to be strong logistics nodes.
Following these acquisitions, Equites has 49.5 ha of prime, serviced, industrially zoned land available for development in Cape Town and Gauteng.
Moreover, the company is nearing completion on a premier fast-moving consumer goods building, with 15 216 m2 GLA, at Lord’s View, in Gauteng. The building is expected to be completed July and will have a capital value of R165-million.
Equites is also building three speculative units at Equites Park Atlantic Hills, in Cape Town, and one at Lord’s View.
One of the company’s speculative build units has been let to an existing tenant, JF Hillebrand South Africa, which also occupies an adjacent property.
A second speculative build is being marketed and the company is communicating with prospective tenants.
These speculative builds comprise 4 623 m2 and 4 653 m2 GLA, respectively, with estimated completion in August and a capital value of R87.6-million.
A third speculative unit of 5 839 m2 is expected to be completed in July, with a capital value of R58.4-million.
The speculative unit at Lord’s View comprises 11 275 m2 GLA and is estimated to be complete in August, with a capital value of R94-million.
Equites CEO Andrea Taverna-Turisan concluded that the board expects Equites will achieve between 10% to 12% growth in distributions a share for the 2019 financial year. This guidance is based on the assumptions that a stable macroeconomic environment will prevail and that the rand/pound exchange rate remains materially unchanged.