Property developer Equites Property Fund achieved distributions per share (DPS) of 66.50c for the six months ended August 31, aligned with its market guidance.

The group is now targeting full-year DPS at the upper end of its previously guided range of 130c to 135c.

The group says 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.

This is further supported by refinanced debt at considerably tighter spreads and a 65% uptake of the group’s dividend reinvestment programme (DRIP).

Equites highlights the strength of its R28.3-billion property portfolio, which is fully let with a weighted average lease expiry of 13.2 years, 99% of rental income derived from A-grade tenants and robust escalation clauses.

These fundamentals support high-income certainty over a sustained period, bolstering property valuations, the group avers.

“The group continued with its successful recycling of capital out of older, noncore assets into new developments on existing land holdings, disposing of a further R600-million of properties.

“Together with the DRIP, this has enabled a R900-million 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,” Equites CEO Andrea Taverna-Turisan says.

Equites completed a development at Jet Park, in Gauteng, in March, which has been let to the Spar Group. It also completed a R200-million extension of a facility under an existing lease, in Centurion, Gauteng.

The group also completed the construction of a campus for Shoprite in Riverfields, Gauteng. The total capital value of the property is R1.4-billion and it is let to Shoprite on a 20-year lease.

Equites further completed speculative developments with a total gross lettable area of 15 000 m², which were let to a single tenant before practical completion.

The group has a development pipeline in South Africa of R1.3-billion (capital value).

Equites continues with its disposal programme and expects to dispose of a further R2.4-billion of assets before year-end.

Taverna-Turisan says a notable development during the six months under review has been the exit from the ENGL development platform. This exit marked a change in strategy, which Equites embarked on 12 months ago, necessitated by a change in global macroeconomic conditions.

The sale includes a portion of its assets in the platform for £10-million. The remaining sites are excluded from the transaction until these schemes are unlocked through forward-funded developments or outright sales.

This will allow Equites to redeploy proceeds to higher-yielding opportunities and not allocate further capital to the schemes included in the disposal.

Equites has R14.5-billion in debt facilities with a weighted average debt maturity profile of three-and-a-half years and R2.2-billion in cash and undrawn facilities.

At period-end, the group had hedged 86% of debt maturing after one year.

The loan-to-value at period-end was 41%, which Equites expects will reduce to 38% by year-end upon completion of the identified disposals.

The interest coverage ratio increased to 2.4 times in the period, driven by the developments over the preceding 18 months, which is now becoming income-producing, and which Equites expects to continue.

Equites raised further seven-year funding through the private placement of R400-million.

The group has an unencumbered asset ratio of 53.8%, an increase in the proportion of unsecured debt.

Total installed solar capacity grew to 23.5 MW, while the number of buildings with solar PV systems increased to 32. Renewable energy as a percentage of total grid energy consumed increased to 18.6%, with 47% of the South African 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 the portfolio is being managed by introducing wastewater treatment plants to minimise the group’s water footprint.

Equites achieved its first Edge net-zero carbon certification during the period under review.

PROSPECTS
Globally, the rate-cutting cycle has started, and monetary easing is expected to create strong tailwinds for the property sector, Taverna-Turisan says.

He notes that the top end of the South African logistics sector remains robust and that demand is expected to continue, which the group is confident it can capitalise on.

The group expects the UK’s nationwide vacancy rate to trend downwards into 2025 owing to strong demand for existing units.