JSE-listed logistics real estate investment trust Equites Property Fund has reported a distribution per share (DPS) of 133.92c – at the upper end of guidance – for the financial year ended February 28.

This compares with a DPS of 131.12c in the prior financial year.

The company’s distributable earnings grew by 8.9% year-on-year to R1.1-billion, while its earnings a share decreased by 21% year-on-year to 116.6c.

Through an extensive asset recycling programme over the last 24 months, the group has disposed of several smaller assets, specialised assets or non environment- and governance-compliant assets.

Equites has increasingly focused on developing environmental, social and governance-compliant assets, supported by 26.7 MW of solar capacity (compared with 20 MW in the prior year) and six power purchase agreements having been signed. The number of buildings with solar PV increased from 29 in the prior year to 37 in the reporting year.

Within the next 18 to 36 months, the company expects to commission an additional 4.2 MW of green energy from a combination of 14 grid-tied and hybrid solar plus 3 MWh battery storage systems, at a forecasted capital expenditure of R78-million.

The expected internal rate of return on these contracts average 23.6% with a typical net initial yield of about 24.3%.

The company is also in the early stage of developing an integrated biological wastewater treatment plant, since 75% of water use in its logistics facilities need non-potable water and can therefore derive value from wastewater-treated water.

Meanwhile, the company’s disposals amounted to R2.3-billion in the year under review, comprising 15 assets.

The resultant portfolio serves to provide high income predictability and strong rental and capital growth opportunities aligned with Equites' commitment to its sustainability objectives.

The company’s portfolio is currently valued at R27.7-billion across 65 properties – 59 of which are based in South Africa valued at R21.1-billion and six in the UK making up the balance of the portfolio value.

The South African property portfolio delivered like-for-like rental growth of 5.9% in the year under review, while valuations increased by 6% on a like-for-like basis.

The South Africa portfolio has a weighted average lease expiry (WALE) of 14.1 years and zero vacancies as of February 28.

Equites' UK portfolio also delivered strong rental growth in the reporting year, with three assets undergoing rent reviews, resulting in uplifts of between 19% and 69%.

The valuations have remained reasonably flat with 1% growth in pound terms.

The UK portfolio has a WALE of 13.1 years with only a single ancillary unit, representing 1.5% of the UK portfolio, being vacant.

Equites’ loan-to-value ratio is currently 36%, down from 39.6% in the prior year, despite R1.5-billion in construction and development spend, with the reduction having been driven by the disposal programme during the year.

Equites CEO Andrea Taverna-Turisan says the industrial sector remains the most favourable property sector in South Africa, with low vacancy rates, high rental growth and overall sector performance fuelled by intensifying demand from retailers and third-party logistics companies.

Global multinationals and large listed organisations form the backbone of Equites’ tenant portfolio, which supports high income certainty over a sustained period and good property valuations.

The company had R2.9-billion of cash and unused facilities at the end of the reporting year.

The board expects its DPS to grow by between 5% and 7% to between 140.62c and 143.29c in the 2026 financial year, premised on a strong tenant base, the completion of several large-scale developments enhancing revenue and the certainty of overhead expenses.

PORTFOLIO DEVELOPMENTS

Over the last nine years, Equites acquired and developed 14 assets in the UK, with a cumulative development of more than €450-million and a peak value of €550-million, which reflects the value created over the period.  

However, as market conditions in the UK changed, the company reassessed whether this capital allocation would yield the highest possible returns for shareholders.

The company has since decided to sell seven of its UK-based assets, including the Newlands development platform. Equites is also considering the sale of the remaining UK portfolio, owing to the maturity of existing assets and the opportunity to reinvest the proceeds in South Africa.

Taverna-Turisan confirms that two more assets will be sold during the first quarter of the 2026 financial year, but the company is not in a rush to sell the remainder of its UK-based properties.

In South Africa, Equites successfully completed a 16 721 m² facility at Jet Park in March 2024, which is being let to retailer Spar. 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 80 531 m² facility at Wells Estate, Eastern Cape, and a groundbreaking R1.3-billion campus in Riverfields, Gauteng.

Three speculative developments with a total gross leasable area of 20 116 m² were completed in the year under review. 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.

Taverna-Turisan is confident that strong structural drivers underpin the long-term demand for high-quality logistics assets.

“Our 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.”

Ultimately, the completion of development in the 2026 financial year will result in enhanced inflow of rental income and, together with the disposal of older assets, will ensure that the portfolio comprises modern logistics facilities with the potential for strong capital growth.