JSE-listed specialist logistics property developer and landlord Equites Property Fund on Thursday reported a 20% year-on-year increase in distributions to 54.44c a share for the six months ended August 31.

Speaking to Engineering News Online CEO Andrea Taverna-Turisan attributed the increase to the large capital raise the company completed at the end of last year, when it raised R1.5-billion through the placing of 120-million shares.

“The consequence of that was a massive debt saving. Many of our new developments have [also] come on line at an attractive yield, [while our portfolio has grown] from R1.1-billion when we listed [in June 2014] to R5.9-billion at the end of this interim period,” he said.

Despite a significant increase in the portfolio size, the company achieved a nominal increase in administrative costs, which further benefited the results.

“The continued strong financial results are a reflection of persistent demand for modern, well located logistics facilities and the company’s focus on institutional tenants and sound property fundamentals,” he said.

Equites’s strong property fundamentals are reflected in its weighted average lease expiry which is in excess of five years, its 88% blue-chip tenant component, healthy lease escalations, near 0% vacancies and a 100% tenant retention rate since listing.

Taverna-Turisan, meanwhile, highlighted the strategic partnership with property development company Attacq to jointly pursue industrial developments, initially resulting in the acquisition of eight completed industrial properties for R733-million at Waterfall, Midrand, at an acquisition yield of 8% and an average lease expiry profile of 8.4 years.

“The association with them will give us long-term benefits; as much as they are a growth fund and we are a distribution fund. We have different requirements in terms of what we are trying to achieve; they want to develop as much as possible and we want perpetual income as much as possible,” he said.

Taverna-Turisan added that 84% of the funding in that joint venture vehicle had been hedged and that the resulting growth factor coming out of that will be substantial.  

The company also completed the acquisition of a Tesco distribution centre in Hinckley, in the UK, for £28-million at an acquisition yield of about 7.2%, based on the first year’s rental income of £2.02-million.

Taverna-Turisan pointed out that the acquisition of a 20 410 m² distribution centre in Trentham Lakes, Stoke-on-Trent, in in the UK, which is let to Amazon on a ten-year lease that started in July, will be completed within the next few days.

The acquisition yield was about 6.14%, based on the first year’s rental income of £1.04-million. The property is in the centrally located Midlands, which benefits from continued strong demand from logistics users in the UK.

Taverna-Turisan said Equites continues to see strong demand in South Africa for modern distribution centres in major logistics nodes, supported by the continuing centralisation of distribution by major retailers, increased levels of imports into the country and a shift towards online retailing. 
      
“We see strong demand for further development leases on our existing land and will continue to pursue opportunities to acquire logistics properties that meet our investment criteria [in South Africa] and in the UK. This should continue to provide robust growth to the portfolio value, as well as the distributions,” he said.