EQUITES’ PRIME LOGISTICS PORTFOLIO DELIVERS ANOTHER STRONG PERFORMANCE
Highlights for the 2025 financial year include:
| DPS of 133.92 cps, at the upper end of guidance |
| Distribution pay-out ratio of 100% |
| LTV reduced from 39.6% to 36.0% |
| R2.9 billion in cash and unutilised facilities |
| Disposals of R2.4 billion concluded and transferred during FY25 |
| Signed six Power Purchase Agreements (“PPAs”) which will be revenue generating in FY26 |
Cape Town, 15 May 2025. Equites Property Fund Limited announced its results for the 2025 financial year today, showcasing strong performance from both the South African and United Kingdom portfolios. This success was bolstered by a significantly reduced loan-to-value (LTV) ratio and Equites’ achievement of securing the lowest credit spreads in the sector during FY25. This accomplishment was directly linked to the strength of Equites’ balance sheet and the quality of its underlying portfolio.
Equites CEO, Andrea Taverna-Turisan said: “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 cps, which is on the upper end of the previously provided guidance.”
Equites is the only specialist logistics REIT listed on the JSE. From a returns perspective, the industrial sector remained the most favourable property sector 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 are fuelled by intensifying demand from retailers and 3PLs. 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 focuses on high-quality logistics properties, let to A-grade tenants on long-dated leases. Equites’ portfolio fundamentals are exceedingly robust. The R27.7 billion portfolio is 99.9% occupied, with a WALE of 14 years and strong escalation clauses. Global multi-nationals and large listed organisations form the backbone of the tenant portfolio. These fundamentals support high-income certainty over a sustained period, bolstering property valuations.
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. The Group has disposed of several smaller, specialised, and non-ESG compliant assets over the last 24 months. The resultant portfolio provides high-income predictability and robust rental and capital growth opportunities aligned with Equites’ commitment to its sustainability objectives.
Equites’ UK portfolio delivered exceptional 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.
Capital allocation to maximise value
The Group acquired and developed 14 assets in the UK, with a cumulative development value exceeding £450 million. These assets reached a peak value of £550 million, 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. 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 R195 million of improvements to the Shoprite Centurion facility, as part of the existing lease expiring in 2044. Two other Shoprite facilities were completed, both with 20-year leases – the R1.2 billion development of an 80,531m2 facility at Wells Estate, Eastern Cape and a groundbreaking R1.3 billion campus in Riverfields, Gauteng.
Three speculative developments with a total GLA of 20,116m² were completed in FY25. Two of these facilities were let before the practical completion date, and the third was let within three months of completion, demonstrating the intensifying demand for high-quality logistics assets in prime nodes. Through the 48 hectares of strategically located land that Equites controls, its development expertise, and its relationships with key retailers, 3PLs, and FMCG players, Equites is strategically positioned to exploit the current supply gap and grow its portfolio of excellence in SA.
Equites CEO, Andrea Taverna-Turisan, said: “We are confident that strong structural drivers underpin the long-term demand for high-quality logistics assets. Our track record of developing world-class facilities and a prime logistics portfolio will continue to attract top-tier clients and promote sustainable value creation for shareholders over time.”
Optimise the Group’s capital structure and reduce the cost of funding
The Group has reduced its LTV from 39.6% to 36.0%, despite R1.5 billion construction and development spending in FY25. The reduction was driven by R1.4 billion of assets sold in SA at a premium to book value of 1% and R1 billion of assets sold in the UK at a discount of 0.5%, reinforcing the validity of the Group’s property valuations. Successful dividend reinvestment options for the two dividends during the year also contributed to the lower LTV.
The asset disposals and other strategic initiatives ensure that the Group is well capitalised with a low exposure to market risks and is successfully positioned to take advantage of performance-enhancing development opportunities. Given the exciting prospects, the Group has R2.9 billion 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.
Through refinancing debt in South Africa and careful interest rate risk management, the Group’s all-in cost of debt in South Africa decreased from 9.1% to 8.6%, with an average debt maturity of 3.8 years. The UK cost of debt has remained constant at 3.9%, with almost 90% of UK debt maturing in FY33. More than 83% of the debt is hedged against interest rate volatility.
Growing revenue streams from alternative sources while fulfilling our ESG aspirations
ESG is a key aspect of the Group’s strategic positioning and continues to be at the core of its operations. These efforts have been recognised through the Morningstar Sustainalytics ESG Regional top-rated and ESG Industry top-rated company awards, received for the second consecutive year.
In addition to extensive climate-conscious construction initiatives and water efficiency interventions, Equites has dedicated significant time and resources to ensuring its tenants are shielded from electricity-related disruptions due to load-shedding or failing infrastructure. At year-end, the total solar generation capacity in the portfolio was 26.7 MW, with over two-thirds of the portfolio being supplied with solar energy. An additional 4.2 MW of green energy will come online in 18-36 months at a forecasted capital expenditure of R78 million.
Over the last 24 months, the Group has started implementing Power Purchasing Agreements (PPAs) to sell renewable energy generated on Equites’ rooftops to tenants at a discount to prevailing tariffs. Thus far, the Group 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.
Prospects
The Board expects DPS to increase at a rate above inflation going forward, within a target range of 140.62 – 143.29 cents per share – reflecting growth of between 5% and 7%. The Board’s DPS guidance is premised on the strong tenant base, the completion of several large-scale developments at Riverfields, Wells Estate and Canelands in FY25, enhancing revenue in FY26, and the certainty of overheads.
Equites CEO, Andrea Taverna-Turisan, concluded: “Equites has made the strategic decision to invest in assets which offer both income certainty (through tenure) and annual escalation clauses, thereby organically underpinning distribution growth. LFL rental growth for FY25 amounted to 5.9%, a level at which the Group expects to see LFL growth stabilising. By effectively managing administrative costs and the cost of debt, the Group expects to deliver distribution growth consistently higher than South African consumer inflation over the long term.
