Equites Property Fund said there has seen a sharp rise in the number of development opportunities in SA in the past six months due to record levels of demand for warehousing space.
CEO Andrew Taverna-Turisan said at the release of the group’s results for the six months to August 31, 2022 that they were well positioned to capitalise on these opportunities, given their strategic land bank – there is a shortage of suitable land for large warehousing and distribution developments, in Durban and Cape Town in particular, he said in a telephonic interview.
Equites’ existing development pipeline will add 228 000m² of prime logistics space over the medium term, with a combined capital value of R2.7 billion.
He said given the strong demand, the group might require additional capital in the future for developments, but given the relatively low share price and despite nine successful accelerated bookbuilds since listing, Equites would likely find alternative sources of capital.
He said much of the demand was being driven by large blue chip companies needing to bring their warehousing and distribution to modern levels of sustainability and efficiency.
There was a lack of available A-grade logistics facilities in the country that complied with modern logistics specifications. Vacancy rates across the SA logistics market had reached historic lows.
Furthermore, there was a clear distinction between A, B and C grade, and modern A-grade facilities. While there were seemingly large tracts of land across South Africa, obtaining sewerage, water and electricity connections was becoming “extremely challenging”.
Just to obtain zoning for a new site may take four to five years, he said.
In addition, there was pent up demand from existing warehouse occupiers, as many companies had delayed real estate decisions until the pandemic subsided.
Retailers also had to rethink their supply chain strategies after the past few years of disruption to ensure resilience and diversification and optimal costing. This had driven demand for new distribution centres.
A shift among some retailers to “greener” distribution centres was also driving demand. Clients were demanding bigger yard areas to support better storage efficiencies.
Equites’ strong interim performance was supported by external tailwinds, including supply chain optimisation, growth in e-commerce and consumers’ requirements for faster fulfilment.
He said the company’s own property fundamentals were robust, its capital allocation had remained disciplined and it had a strong balance sheet.
The distribution per share increased 4.1% to 81.58c. Distribution policy was unchanged at a 100% payout ratio. Net asset value per share increased 0.8% to R18.77 from R18.61 on February 28. The share price traded 0.7% lower at R16 yesterday afternoon.
He said the distribution per share growth guidance of between 4% and 6% for the year was unchanged, barring unforeseen events.
In SA, eight projects of 228 000m² were under construction. The SA portfolio of 1.3 million square metres was fully occupied.
In the UK, Equites controls 13 sites through its strategic venture with Newlands, with a developable area of more than 1.4 million square metres. The pipeline of development opportunities was estimated to exceed £1 billion over the next three to five years, providing Equites with an opportunity to build scale in the top end of the UK logistics market, he said.
edward.west@inl.co.za
BUSINESS REPORT