Equites Property Fund embarks on UK asset disposal to reinvest in SA logistics sector

Equites Property Fund, a specialist logistics real estate investment trust, has initiated a phased disposal of its UK assets as it seeks to reinvest in the burgeoning South African logistics sector.

This strategic shift comes amid a backdrop of strong operations and a focus on long-term growth potential, according to CEO Andrea Taverna-Turisan, who spoke during the company’s online financial results presentation on Thursday.

As of August 31, the Fund reported a 3.8% dividend per share (DPS) increase to 69.04 cents and reaffirmed its full-year dividend guidance between 140.62 and 143.29 cents, reflecting an anticipated growth of 5% to 7%. Taverna-Turisan expressed optimism about their performance, noting that the portfolio’s quality has improved following the sale of older non-core assets while embracing new, environmentally sustainable properties.

Equites’ portfolio value has grown to R28.3 billion as of August 2025, up from R27.7bn earlier this year, credited mainly to new acquisitions of R146 million, development expenditures amounting to R327m, and a notable 4% like-for-like fair value uplift on the income-producing portfolio. However, this growth has been tempered by disposals of R668m.

Taverna-Turisan said the proceeds from the divestitures in the UK will be reinvested into premier, ESG-compliant logistics developments strategically located across South Africa, secured by long-term leases. The CEO underscored the persistent demand for prime logistics assets in SA, driven by retailers upgrading supply chains, logistics providers expanding fulfilment networks, and fast-moving consumer goods (FMCG) operators modernising facilities.

Despite a challenging macroeconomic environment, demand for logistics space in South Africa remains robust, underpinned by limited supply due to low vacancy rates and a scarcity of bulk land plots, he said.

This imbalance has resulted in an estimated 7.3% annual rise in nominal gross rentals for new logistics developments, particularly for well-located, A-grade facilities. Equites has reported burgeoning market interest, receiving inquiries for approximately 268 000 square metres of new developments and existing spaces over the last 18 months.

The company has initiated two speculative developments at Meadowview and Riverfields to meet this escalating demand. While the Meadowview facility is currently under offer, a lease agreement has already been finalised at Riverfields ahead of its practical completion.

Operationally, Equites maintained momentum, signing six new leases and forecasting a like-for-like portfolio rental growth of 5.1%, which is expected to rise to between 5.5% and 6% per annum as rental reversions stabilise. According to Taverna-Turisan, the low vacancy rate of 1.5% at period-end largely reflects a healthy income certainty outlook.

As part of its UK asset review, Equites currently holds seven income-producing assets and a land option at Thrapston, valued collectively at R5.4bn. The company has sold an asset in Burgess Hill for £17.7m pounds in August, leveraging the proceeds to settle associated debts. Looking ahead, management actively marketing a portfolio of five income-generating assets from the first quarter, the Aviva portfolio, and expects further disposals in the upcoming 18 months.

Accessing these funds will allow Equites to pay down UK debts, with surplus reinvested domestically where yield opportunities exist. CFO Laila Razack indicated that the anticipated sale of UK assets will aid in reducing the company's loan-to-value (LTV) ratio from its current 37.2%, with efforts to return it to target levels between 35% and 40% swiftly thereafter.

Equites is committed to ensuring consistent distribution growth ahead of SA CPI by maintaining stringent control over administrative costs and optimising its debt costs. With R14.2bn in debt facilities and R3.4bn in cash and undrawn facilities, the company remains well-positioned to drive future growth in a rapidly evolving logistics landscape, said Razack.

BUSINESS REPORT