How Equites Property Fund left peers far behind
Group reports double-digit dividend growth on rentals, sound management and acquisitions
Equites Property Fund, which owns industrial property in SA and the UK, has impressed investors yet again with financial results that showed double-digit dividend growth while its peers have struggled to keep up with inflation.
In the six months to August, Equites grew its dividend 11.7%, due to strong rental growth, sound management and a number of well-timed acquisitions.
The real estate investment trust has been a hugely successful listing since it joined the JSE in June 2014, expanding its assets from R1bn to R10.1bn over that time, and achieving an annualised total return of 24.8% each year.
It has also expanded into the UK in the past couple of years, with its investments there making up about 20% of its annual revenue in the reporting period.
CEO Andrea Taverna-Turisan said he had nearly realised his vision of owning high-end distribution centres only. This was on track as the company had five office buildings and some small industrial properties to sell during the next year and a half.
Equites delivered one of the strongest sets of financial results this reporting season. While the company delivered double-digit dividend growth, many other property groups only managed to grow their income payments between 1% and 4%. Some funds have even seen their dividends shrink.
The company managed to sign leases with tenants at better rates because of the high quality of its assets, which Taverna-Turisan said were “best in class”.
The board approved an interim dividend of 68.12c per share for the six months to August. The net asset value per share increased 9.5% to R16.67 in the period compared with a year ago.
The company, which is the only group solely invested in industrial assets that is listed on the JSE, reported 49% growth in the fair value of its property portfolio, from R6.8bn to R10.1bn.
Distribution centres and high-tech warehouses, which are classified as prime logistics assets, are among the most sought-after property assets in SA, with companies wanting to benefit from future growth in online shopping and seeking to sign up groups that want to establish supply chains.
Taverna-Turisan said prime logistics assets had outperformed retail and commercial property, with strong demand being driven by the growth in e-commerce and retailers increasing efficiencies through sophisticated distribution networks.
“This is the hottest property sector in the world. A wall of cash is leaving retail property and going to logistics. We haven’t seen such a notable restructuring of commercial property since the late 1960s when people started to build shopping centres for the first time,” he said.
He said while 20% of retail sales in the UK were online, only 1% of retail sales in SA were online. This suggested there would be scope for Equites to build assets in SA in the future.
Vacancies fell to 0.2% from 2% at year-end following the letting of a logistics property at Cape Town International Airport.
Richard Colburn, equity analyst at Sanlam Private Wealth, said Equites had once again impressed investors with a strong set of results that were ahead of his team’s expectations.
“They are offering predictable income growth from a well-managed portfolio. I would say they are best of breed when it comes to logistics property owners. The market tends to reward excellence and companies which look difficult to replicate,” he said.