Equites pays lav­ish div­i­dend

• Prop­erty fund de­clares dou­ble-digit dis­tri­bu­tion growth as di­ver­si­fied port­fo­lio flour­ishes amid scarce com­pe­ti­tion

Business Day - - FRONT PAGE - Alis­tair An­der­son Prop­erty Writer an­der­sona@busi­nesslive.co.za

Equites Prop­erty Fund, which is fo­cused on high­end lo­gis­tics as­sets, de­liv­ered dou­ble-digit growth in div­i­dends for the six months to Au­gust, mak­ing it one of the top­per­form­ing listed real es­tate groups.

Equites Prop­erty Fund, which is fo­cused on high-end lo­gis­tics as­sets, de­liv­ered dou­ble-digit growth in div­i­dends for the six months to Au­gust, mak­ing it one of the top-per­form­ing listed real es­tate groups.

The com­pany achieved a 12.02% in­crease in half-year div­i­dends to Au­gust, one of the few dou­ble-digit in­come providers in 2017. It was also in­cluded in the FTSE/JSE South African Prop­erty In­dex (Sapy) for the first time.

Equites CEO An­drea Tav­erna-Turisan said the com­pany, which has a mar­ket cap­i­tal­i­sa­tion of about R8.5bn, was well po­si­tioned as a spe­cial­ist in­dus­trial fund and was only fac­ing mean­ing­ful com­pe­ti­tion from one other listed group, the R63bn Fortress In­come Fund.

“Our base port­fo­lio is very strong and is spit­ting out good money. Our cost of cap­i­tal is very at­trac­tive and we are ef­fec­tively only com­pet­ing with one group that owns sim­i­lar as­sets and at­tracts sim­i­lar ten­ants — Fortress In­come Fund, which is also listed,” he said.

“We are able to have a crack at many ma­jor de­vel­op­ments, es­pe­cially while eco­nomic growth is weak and pri­vate in­dus­trial prop­erty groups have less liq­uid­ity and face chal­lenges. Right now we are happy to com­pete with a solid op­er­a­tor like Fortress. We win some deals and we lose some deals to them,” he said.

Equites de­clared a half-year dis­tri­bu­tion of 60.98c per share, which was at the up­per end of its guid­ance of 10% to 12%. Equites is the only spe­cial­ist lo­gis­tics prop­erty fund listed on the JSE.

Since list­ing in 2014, it has in­creased its port­fo­lio of in­dus­trial and mainly lo­gis­tics as­sets in SA and the UK from R1bn to R6.8bn. It is one of the top­per­form­ing real es­tate in­vest­ment trusts (Reits) listed on the JSE, when mea­sured by its an­nu­alised re­turn of 28% over the past three years.

The com­pany di­ver­si­fied into the UK by fo­cus­ing on pre­mium lo­gis­tics dis­tri­bu­tion cen­tres in key nodes, built to in­sti­tu­tional spec­i­fi­ca­tions and let to in­vest­ment-grade ten­ants on long­dated up­ward-only leases.

Equites com­pleted three ac­qui­si­tions of lo­gis­tics as­sets, which make up 15.6% of the total port­fo­lio by rentable area. It con­cluded a fur­ther agree­ment to ac­quire a dis­tri­bu­tion cen­tre in Coven­try for £41m.

The UK shift is low risk and will feed off e-re­tail de­mand, ac­cord­ing to com­men­ta­tors.

“Equites has been a star per­former. The com­pany has pro­duced a total re­turn of 39% com­pared with 10% for the Sapy in­dex for the year to date. It’s a fo­cused spe­cial­ist fund … ben­e­fit­ing from the de­mand for mod­ern lo­gis­tics fa­cil­i­ties as a con­se­quence of e-re­tail­ing, which is ex­pected to con­tinue grow­ing in SA and the UK where Equites op­er­ates,” said Len van Niek­erk, se­nior prop­erty an­a­lyst at Ned­bank CIB.

Fayyaz Mot­tiar, head of listed prop­erty at Absa As­set Man­age­ment, fore­cast that Equites would achieve at least 10% growth in div­i­dends for the next five years.

Gar­reth El­ston, of Golden Sec­tion Cap­i­tal, said Equites was one of the best-man­aged Reits in SA. “The com­pany’s ex­pan­sion in the UK has been done in a pru­dent man­ner and they have ac­quired very solid as­sets. The South African port­fo­lio is per­form­ing well and we see on­go­ing de­mand for the com­pany’s as­sets and de­vel­op­ments.”

Graphic: KAREN MOOLMAN Source: IRESS

AN­DREA TAVERNATURISAN

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